Question

P and Q are partners in a firm sharing profits in the ratio of of 3:2. On Jan. 1, 2014 they admit R as a new partner for 1/6 th share in the profits. R brought Rs.2,50,000 for his capital but could not bring any amount for goodwill. The firm’s goodwill on R’s admission was valued at Rs.2,40,000. Record necessary journal entries in the books of the firm.​

Answer 1

                                            JOURNAL

1. Cash a/c.                    Dr.                       25000

          To Premium for Goodwill a/c                            25000

(Being premium for goodwill brought in by R)

2. Premium for Goodwill a/c. Dr.                  25000

          To M's Capital a/c                                            12500

          To J's Capital a/c                                              12500

(Being premium for goodwill brought in by R distributed in the ratio of 1:1)

Working Note:

1. Calculation of sacrificing ratio:

P's sacrifice= 3/5- 5/10 = 1/10

Q's sacrifice= 2/5- 3/10 = 1/10

Sacrificing ratio= 1:1

2. Distribution of goodwill:

P's share= 1/2 * 15000= 12500

Qxs share= 1/2 * 15000= 12500