Question

Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at ₹ 4,40,000. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was 2 : 2 : 1.
Raja brought ₹ 1,00,000 for his capital and necessary cash for his goodwill premium. The goodwill of the firm was valued at ₹ 2,50,000.
Record necessary journal entries in the books of the firm for the above transactions.

Answer 1

Answer:

(i) Anu's Capital a/c... Dr. 330000

Bhagwan's Capital a/c.... Dr. 110000

To Goodwill a/c 440000

(Being goodwill written off)

(ii) Bank a/c.... Dr. 150000

To Raja's Capital a/c 100000

To Premium for Goodwill a/c 50000

(Being cash and premium for goodwill brought in by Raja)

(iii) Premium for goodwill a/c.... Dr. 50000

Bhagwan's Capital a/c.... Dr. 37500

To Anu's Capital a/c 87500

(Being premium for goodwill and Bhagwan's gain transferred to Anu)

Working Note:

Calculation of sacrificing ratio:

Anu's sacrifice= 3/4- 2/5= 7/20

Bhagwan's gain= 1/4- 2/5= -3/20

Total goodwill of the firm= 250000

Bhagwan's share= 3/20* 250000

= 37500

Answer 2

Anu's Share of Goodwill = $37,500$

Bhagwan's Share of Goddwill = $87,500$

Explanation:

Working Notes:

(1)

Calculation of share in dd Goodwill

Anu's share = $4,40,000 \times \frac{3}{4}$ = $3,30,000$

Bhagwan's share = $4,40,000 \times \frac{1}{4}$ = $1,10,000$

(2)

Calculation of Raja's Share of Goodwill

Raja's Share of Goodwill = Firm's Goodwill * Raja's Profit Share

Raja's share of Goodwill= $2,50,000 \times \frac{1}{5}$ = $50,000$

(3)

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Share - New Share

Raja's Share of Goodwill = Firm's Goodwill Raja's Profit Share

Anu's Share = $\frac{3}{4}-\frac{2}{5}=\frac{7}{20}$ (sacrifice)

Bhagwans Share = $\frac{1}{4}-\frac{2}{5}=\frac{3}{20}$ (gain)

Anu's Share of Goodwill = $\frac{3}{20} \times 2,50,000$ = $37,500$

Bhagwans Share of Goodwill = $\frac{7}{20} \times 2,50,000$ = $87,500$