Question

L. M and N were partners in a firm sharing profits and losses in the ratio of 5: 3:2
On 1" April, 2018 they admitted S as a new partner in the firm for 1/5 share in the
profits. On. S'admission the goodwill of the firm was valued at 3 years purchase of
last five years average profits. The profits during the last five years were:
Year ended 31st March Profit ()
2014
4,00,000
2015
3,00.000
2016
2,00,000
2017
50,000
2018
(50,000)
Calculate the value of the goodwill of the firm. Pass necessary journal entry for the
treatment of goodwill on S's admission.​

Answer 1

Answer:

sorry I didn't know the answer

Answer 2

Explanation:

After adding last 4 year profits and loss

total profit is equal to 900000

avg profit = 900000/5 = 180000

Goodwill = 180000×3 = 540000

share of new partner is 1/5 of his share in goodwill will be 540000/5 = 108000

journal entry

bank A/c Dr 108000

To Goodwill premium 108000

Goodwill premium A/c. Dr 108000

To L's capital a/c. 54000

To M's capital a/c 32400

To M's capital a/c 21600

(ratio will be same as old ratio beacuse we have not give how much share new partner will get from old parters )