A commenced busniess with₹50,000
Answers
Answer:
cash a/c dr
To capital A/ c
Answer:
question
Mr. A commenced business with a capital Rs.2,50,000 on 1
st
April,2013. During the five years ended 31
st
March,2018, the following profits and losses were made:
31
st
March,2014 = Loss Rs.5,000
31
st
March,2015 = Profit Rs.13,000
31
st
March,2016 = Profit Rs.17,000
31
st
March,2017 = Profit Rs.20,000
31
st
March,2018 = Profit Rs.25,000
During this period he had drawn Rs.40,000 for his personal use. On 1
st
April,2018, he admitted B into partnership on the following terms:
B to bring for his half share in the business, capital equal to A
′
s Capital on 31
st
March,2018 and to pay for the one-half share of goodwill of the business, on the basis of three times the average profit of the last five years. Prepare the statement showing what amount B should invest to become a partner and pass entries to record the transaction relating to admission.
ANSWER
Capital as on April,1 2013
Less: Loss on 31st March, 2014
Add: Profit on 31st March, 2015
Add: Profit on 31st March, 2016
Add: Profit on 31st March, 2017
Add: Profit on 31st March, 2018
250000
(5000)
13000
17000
20000
25000
Less: Drawings 320000
(40000)
Capital as on March 31st, 2018 280000
Calculation of Goodwill:
Average profit= [-5000+13000+17000+20000+25000]/5
= 14000
Goodwill= 14000 * 3
= 42000
B's share of Goodwill= 42000 * 1/2= 21000
B's Capital= A's Capital= 280000
JOURNAL
1. Cash a/c..... Dr. 301000
To B's Capital a/c 280000
To Premium for Goodwill a/c 21000
(Being capital and premium for goodwill brought in by B)
2. Premium for Goodwill a/c... Dr. 21000
To A's Capital a/c 21000
(Being premium for goodwill transferred to A's Capital account)
Explanation: