Question

Q. 36. A and B are partners sharing profits in the ratio of 3 : 2. On 1st
they admit C as a new partner forth share. C acquires th of his share from
Goodwill on C's admission is to be valued on the basis of capitalisation of
profits of the last five years. Profits were :
Year ended
31st March, 2014 Profit 350,000
31st March, 2015 Profit 1,20,000 (including gain of 40,000 from sale of fixed assets)
31st March, 2016 Loss 60,000 (after charging Loss by Fire 50,000)
31st March, 2017 Loss 1,00,000 (after charging voluntary retirement compensation paid
1,50,000)
31st March, 2018 Profit 1,90,000
On 1st April, 2018, the firm had assets7,00,000 and external liabilities of 2,20,000.the normal rate of return on capital is 12%
C brings in Rupees 125000 is capital but is unable to bring his share of goodwill in cash
you are required to calculate C's share of goodwill and calculate new profit sharing ratio and pass journal entries ​

Answer 1

Explanation:

The role of accounting has now shifted from that of a mere recording of business transactions to that of providing information to managers and other various interested parties in order to help them in making appropriate decisions.