KEVIN and JOS were partners in a firm sharing profits in a firm sharing profits and losses in the ratio of 3:2. They admit JACK for 1/6 th share in profit and guaranteed that his share of profits will not be less than ` 250,00,000. The profits of the firm for the year ended 31 st March, 2020 were ` 900,00,000. Calculate share of profit for each partners when : a. Guarantee is given by firm b. Guarantee is given by KEVIN c. Guarantee is given by KEVIN and JOS equally.
Answers
Answer:
JOURNAL
1. Cash a/c... Dr. 350000
To C's Capital a/c 200000
To Premium for Goodwill a/c 150000
(Being capital and premium for goodwill brought in by C)
2. Premium for Goodwill a/c... Dr. 150000
To A's Capital a/c 110000
To B's Capital a/c 40000
(Being premium for goodwill distributed among the partners in the ratio of 11:4)
3. A's Capital a/c.... Dr. 55000
B's Capital a/c.... Dr. 20000
To Cash a/c 75000
(Being half of the premium for goodwill withdrawn by the partners)
Calculation of sacrificing ratio:
A's sacrifice= 3/5- 2/7= 11/35
B's sacrifice= 2/5- 2/7= 4/35
Sacrificing ratio= 11:4
Working Note:
Distribution of goodwill:
A's share= 150000 * 11/15= 110000
B's share= 150000 * 4/15= 40000