Question

A, B and C are sharing profits in the ratio of `3:2:1`. B retires and on the day of B's retirement Goodwill is valued at Rs. 60,000. A and C decided to share future profits in the ratio of `3:2`. Journal entry will be:

Answer 1

Answer:

old ratio (A,B and C) =2:2:1

B share =2/5

B share of goodwil =rs 60000×(2/5)=24000

contibution to compensate B by

A=24000×(2/3)=16000

B=24000×(1/3)=8000