Arjun, Bhim and Nakul are partners sharing profits and losses in the ratio of 14 : 5 : 6 respectively. Bhim retires and surrenders his 5/25th share in favour of Arjun. The goodwill of the firm is valued at 2 years purchase of super profits based on average profits of last 3 years. The profits of the last 3 years are Rs.50,000, Rs.55,000 and Rs. 60,000 respectively. The normal profits for the similar firm are Rs.30,000. Goodwill already appears in the books of the firm at Rs. 75,000. The profit for the first year after Bhim's retirement was Rs. 1,00,000. Give the necessary journal entries to adjust Goodwill and distribute profits showing your workings.
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Bhim retires and surrenders his 5/25th share in favour of Arjun. The goodwill of the firm is valued at 2 years purchase of super profits based on average profits of last 3 years. The profits for the last 3 years are Rs 50,000, Rs 55,000 & Rs 60,000 respectively. The normal profits for the similar firm are Rs 30,000.
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