Dec and Anand sharing profits equally admit Karan for 1/4th share in profits. Karan pays 10000 for goodwill out of his share of 18000. goodwill appears in the balance sheet at 60000 . pass journal entry to record these transection.
Answers
Answer:
In this question there are two types of goodwill i.e Book goodwill and Valued goodwill.
Book goodwill is the goodwill which is already present in the balance sheet of the books before admission of partner. So this goodwill must be writen of to old partners in old ratio.
Valued goodwill is the generated/ valued goodwill which is calculated by firm by different methods. It is distributed to the partners in their sacrificing ratio.
Here,
Book goodwill is rs 60000.
Valued goodwill is rs 10000.
1] Treatment of Book Goodwill.
Dec's Capital A/c Dr 30000
Anand's Capital A/c Dr 30000
To Goodwill A/c 60000
( Being book goodwill writen off )
here the old ratio is 1:1 i.e equal
2] Treatment of valued goodwill.
Karan's Capital A/c Dr 10000
To Dec's Capital A/c 5000
To Aanand's Capital A/c 5000
( Being the amt of goodwill distributed among partner in sacrificing ratio )
here sacrifice ratio is equal i.e 1:1