Accountancy, asked by pragyabara8, 3 months ago

Q.16 Sita, Reeta and Geeta are partners in a firm sharing profits and losses in the ratio of 4 3:1. As per the
terms of partnership deed, on the death of any partner, goodwill was to be valued at50% of the net profits
3
credited to that partner's capital account during the last three completed years before her death Sita died
on 28 February 2019. The profits for the last five years were 2014-Rs.60,000, 2015- Rs 97.000, 2016-
Rs. 105.000, 2017-Rs.30.000 and 2018-Rs.84,000.
On the date of Sita's death, building was found undervalued by Rs.80,000, which was to be considered
Calculate amount of Sita's share of goodwill in the fim and complete the following journal entries. The
new profit-sharing ratio between Reeta and Geeta will be equal
Date Particulars
LF Amt. (Dr.) Amt. (Cr.)
Dr
To
(Being the increase in value of building brought into
account)
80,000
Revaluation account
Dr
To Sita's capital a/c
To
To Geeta's Capital Alc
(Being the transfer of profit on revaluation to
partners' capital account in their old profit-sharing
ratio)
Dr.
13.688
Dr.
To
(Being Sita's share of goodwill adjusted in the
capital accounts of gaining partners in their gaining
ratio,ie. 1.3)

Answers

Answered by priyaag2102

1) Building A/c Dr. 80,000

To Revaluation A/c 80,000

2) Revaluation A/c Dr. 1,64,000

To Sita's Capital A/c 82,000

To Reeta's Capital A/c 61,500

To Geeta's Capital A/c 20,500

3) Geeta's Capital A/c Dr. 13,688

Reeta's Capital A/c Dr. 41,062

To Sita's Capital A/c 54,750

Calculation of Sita's share of Goodwill

Profit credited to Sita's Capital A/c in 3 years = Net profit of the three years X Sita's share

= ( 84,000+30,000+1,05,000) X 4/8

= (2,19,000) X 4/8

= 1,09500

Therefore,

Sita's share of Goodwill

=50% of (profit credited to Sita's Capital A/c for past 3 years)

= 1/2 of 1,09,500

=54,750

This share of Goodwill to be distributed between Reeta and Geeta in their gaining ratio 3:1

• Reeta's share in Goodwill

=54,750 X 3/4

=41,062 (approx.)

• Geeta's share in Goodwill

=54,750 X 1/4

= 13,688 (approx.)

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