Question

Sonali and Rupali are partners in a firm with capital of 600000 each. They decided to admit Rakhi as a partner with 1/4th share in the profits and losses of the firm. Rakhi bring of 800000 as her share of capital. Their profit and loss account shows a credit balance of 400000 as on the date of admission. Give journal entry to record Goodwill on rakhi's admission.

Answer 1

Answer:

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Explanation:

ANSWER

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

JOURNAL

1. Cash a/c..... Dr. 80000

To Z's Capital a/c 80000

(Being capital brought in by Z)

2. Z's Capital a/c... Dr. 25000

To X's Capital a/c 12500

To Y's Capital a/c 12500

(Being Z's share of goodwill distributed among the partners in the ratio of 1:1)

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