Singh and Sharma were partners in a firm sharing profit and losses in the ratio of 1:1 on 31-3-2019 their balance sheet was as follows
Answers
JOURNAL
1. Cash a/c .. Dr. 50000
Machinery a/c ... Dr. 70000
To Premium for goodwill a/c 120000
(Being cash and machinery brought in by G for his share of profit as premium for goodwill)
2. Premium for Goodwill a/c ... Dr. 120000
F's Capital a/c ... Dr. 30000
To E's Capital a/c 150000
(Being premium for goodwill and F's gain transferred to E)
Working Note:
1. Calculation of sacrificing ratio:
E's old ratio= 3/4
F's old ratio= 1/4
New ratio of firm after admission= 1:1:1
Sacrificing ratio = Old ratio - New ratio
E's sacrifice = 3/4- 1/3= 5/12
F's gain = 1/4- 1/3= -1/12
2. Total goodwill of the firm= 120000*3/1= 360000
F's gain= 360000 * 1/12= 30000