Question

Harry and Tushar were partners sharing profits and losses in the ratio

of 2:1. They admitted Sunny as a partner for 1/5thshare inprofits.Forthis

purpose, the goodwill of the firm was to be valued on the basis of three

year’s purchase of last five years average profits. The profits for the last five

years were: 4

Years 2015-16 2016-17 2017-18 2018-19 2019-20

Profits 30,000 40,000 60,000 (20,000) 90,000

Calculate goodwill of the firm after adjusting the followings:

a. Profit for 2017-18 was calculated after charging an abnormal loss of goods

by fire of Rs.20,000.

b. Closing stock of Rs.30,000 is undervalued for the year 2018-19.​

Answer 1

ANSWER

JOURNAL

1. A's Capital a/c.... Dr. 12000

B's Capital a/c.... Dr. 6000

To Goodwill a/c 18000

(Being goodwill written off in the ratio of 2:1)

2. Cash a/c.... Dr. 38000

To C's Capital a/c 30000

To Premium for Goodwill a/c 8000

(Being capital and part premium for goodwill brought in by C)

3. Premium for Goodwill a/c... Dr. 8000

C's Capital a/c.... Dr. 2000

To A's Capital a/c 6667

To B's Capital a/c 3333

(Being premium for goodwill distributed among the partners in the ratio of 2:1)

Working Note:

Distribution of premium for goodwill:

A's share= 10000 * 2/3= 6667

B's share= 10000 * 1/3= 3333

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