R, S & T are partners in a firm sharing profit & loss in the ratio of 2 : 2:1. T Retires and his balance in capital a/c after adjustment for reserve & revaluation of assets & liabilities comes out to be Rs. 50000. R & S agree to pay him Rs. 60000. Give journal entry for the adjustment of goodwill.
Answers
Answer:
R's capital a/c dr. 5000
S's capital a/c dr. 5000
to T's capital a/c 10000
(T's share of goodwill adjustment in gaining ratio 1:1)
Explanation:
New ratio between R & S = gaining ratio = 2:2 or 1:1
T’s share of goodwill (hidden) = 60000- 50000 = 10000
Following is the journal entry for the adjustment of goodwill:
Given, R, S, and T are partners in a firm. Their profit-sharing ratio is 2:2:1. T retires. Balance in T's capital account after adjustments for reserve and revaluation of assets and liabilities is: ₹50,000
Amount R and S agreed to pay T: ₹60,000
The amount of hidden goodwill paid to T= amount R and S agreed to pay - the balance of T's capital account after adjustments
= 60,000 - 50,000 = ₹10,000
The amount of goodwill will be given by R and S in their gaining ratio. Gaining ratio of R and S = 2:2 or 1:1
Journal entry for adjustment of goodwill is-
R's capital a/c dr. 5,000
S's capital a/c dr. 5,000
To T's capital a/c 10,000
(being T's share of goodwill given by R and S in their gaining ratio)