Question

X and Y are partners in a firm sharing profits and losses in the ratio of 3: 2. They admit Z
partner for 1/5th share. Goodwill of the firm is valued at 10.000. Goodwill already appears in the
at 5,000. Z brings in 60% of his share of goodwill and 40,000 as his capital in cash. The amo
goodwill brought in cash is withdrawn by the concerned partners to the extent of 30% of
credited to them. The profit for the first year of new partnership amounted to 20,000
Pass necessary Journal entries to adjust goodwill and to distribute profits.​

Answer 1

Answer:

a) X's Capital a/c. Dr ₹3,000

Y's Capital a/c. Dr ₹2,000

To Goodwill a/c. ₹5,000

(Being existing goodwill written off in old ratio)

b) Cash a/c. Dr ₹41,200

To Z's Capital a/c. ₹40,000

To Premium for Goodwill a/c. ₹1,200

(Being capital and 60% of his share of premium for Goodwill brought in by new partner Z)

c) Premium for Goodwill a/c. Dr ₹1,200

Z's Capital a/c. Dr ₹800

To X's Capital a/c. ₹1,200

To Y's Capital a/c. ₹800

(Being premium for Goodwill and remaining amount taken from Z's capital, distributed among sacrificing partner)

d) X's Capital a/c. Dr ₹360

Y's Capital a/c. Dr ₹240

To Cash a/c. ₹600

(Being 30% of share of goodwill withdrawn by sacrificing partners)

e) P & L Appropriation a/c Dr ₹20,000

To X's Capital a/c. ₹9,600

To Y's Capital a/c. ₹6,400

To Z's Capital a/c. ₹4,000

(Being profit distributed among partners in new ratio)

Explanation:

Workings -

1. Sacrificing ratio = 3:2

2. Let, Total share of profit = 1

Z's share of profit = 1/5

Remaining share = 1-1/5 = 4/5

X's new share = 4/5 × 3/5 = 12/25

Y's new share = 4/5 × 2/5 = 8/25

Z's share(given) = 1/5 × 5/5 = 5/25

So, New ratio = 12:8:5

3. Goodwill of the firm = ₹10,000

Z's share of goodwill = ₹10,000 × 1/5

= ₹2,000

4. Z brought 60% of his share of goodwill so he brought premium for Goodwill =

₹2,000 × 60/100

₹1,200

I hope it helps :)