Question

P and Q share profits in the ratio of 7 : 3. R is admitted for 2/7th share

in profits. Goodwill already appears in the balance sheet at ` 1,00,000.

Pass necessary journal entries if–

(a) R cannot bring cash for his share of goodwill ` 80,000.

(b) R brings in cash ` 40,000 out of his share of goodwill ` 80,000.​

Answer 1

Explanation:

(A) r's current a/c....... Dr. 80,000

To p's capital a/c. 56000

To Q's capital a/c. 24000

(In sacrificing ratio)

(B) cash a/c..... Dr. 40,000

R's current a/c.... Dr. 40,000

To p's a/c. 56000

To Q's a/c. 24000

(In sacrificing ratio)

And the goodwill which is already appeared in balance sheet by 100,000 will be distributed between old partners in their old ratio.