P,Q and R share profits in the ratio of 5 : 3 : 2. S was admitted into partnership. S brings in 30,000 as his capital.S is entitled for 1/5th share in profits which he acquires equally from P, Q and R.Goodwill of the firm is to be valued at three years 'purchase of last four years' average profits.The profits of the last four years' are 32,000, 38,000, 35,000 and 31,000 respectively. S cannot bring goodwill in cash. Goodwill already appears in the books at 50,000.Give Journal entries.
Answers
Answer:
Calculation of Share of profits
P's Share -3,50,000*5/10 = 1,75,000
Q's share - 3,50,000*4/10 = 1,40,000
R's share - 3,50,000*1/10 = 35,000
R's guaranteed share is 50,000. So,the deficiency of 15,000 (50,000-35,000) is to be contributed by P and Q in the ratio of 3:2
P's contribution = 15,000*3/5=9,000
Q's contribution= 15,000*2/5 =6000
Journal entry is as follows:-
P's capital A/c Dr 9,000
Q's capital A/c Dr 6,000
To R's capital A/c 15,000
Explanation:
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Answer:
P:Q:R= 5:3:2
S brings 30,000 as capital
S=1/5 acquired equally from all partner
Goodwill valued at 3 year's of purchase
Total Profits =32,000+38,000+35,000+31,000=1,36,000
Average profit= total profit/ total number of years
= 1,36,000/4 = 34,000
Goodwill= Average profit× number of year's of
purchase
= 34,000×3 = 1,02,000
S' share of goodwill= 1,02,000×1/5= 20400
S's current a/c Dr. 20,400
To P's capital a/c. 6,800
To Q's capital a/c. 6,800
To R's capital a/c. 6,800
( being goodwill received )
Goodwill a/c. Dr. 50,000
To P's capital a/c. 25,000
To Q's capital a/c. 15,000
To R's capital a/c. 10,000
Explanation:
In case the new ratio is asked, it is 13:7:4:6
S took 1/3 of 1/5 from all