[Q.]The Capital Accounts of X and Y showed balances of 40,000 and 320,000 on 1st April, 2020. They shared profits in the ratio of 3: 2. They are allowed interest on Capitals @ 10% p.a. and are charged interest on drawings @ 12% p.a. X also advanced a loan of 10,000 to the firm on 1st August, 2020. During the year X withdrew 1,000 per month in the beginning of every month, whereas Y withdrew 1,000 per month at the end of every month. The profits for the year ended 31st March, 2021, before the above mentioned adjustments were 320,960. Show the distribution of profits and prepare the partner's Capital Accounts.
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Answer:
refer to the attachment
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Explanation:
Working Note:
Calculation of hidden goodwill:
Total Capital of the firm after admission= 50000+50000+80000+40000
= 220000
Total capital of the firm based on Z's capital= 80000 * 4/1
= 320000
Hidden goodwill= 320000-220000= 100000
Z's share of Goodwill= 100000 * 1/4= 25000
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