Question

Cake and Muffin are partners sharing profits and losses in the ratio of 5:4. On April 1, 2016, they admit Cookie as a new partner for 1/6thshare in the profits of the firm and the new ratio agreed upon is 3:2:1. Goodwill, at the time of Cookie’s admission is to be valued on the basis of capitalisation of the average profits of the last three years. Profits for the last three years were:
Year ended 31stMarch, 2014₹ 39,000 (including an abnormal loss of ₹9,000).
Year ended 31stMarch, 2015₹ 83,000 (including an abnormal gain of ₹ 8,000).
Year ended 31stMarch, 2016₹72,000.On 1stApril, 2016, the firm had assets of ₹8,00,000.Its creditors amounted to ₹ 3,60,000.
The firm had a Reserve Fund of ₹40,000 while Partners’ Capital Accounts showed a balance of ₹4,00,000. The normal rate of return expected from this class of business is 13% .Cookie brings in₹2,00,000 for her capital but is unable to bring in cash her share of goodwill.
You are required to calculate:
(i)Calculate Cookie’s share of Goodwill in the firm (Show your workings clearly).
(ii)Pass journal entries at the time of Cookie’s admission

Answer 1

Explanation:

On April 1, 2016, they admit Cookie as a new partner for ... the profits of the firm and the new ratio agreed upon is 3:2: 1.

Answer 2

Explanation:

cakes goodwill- 36496 rs.

.......... am not sure but