Question

X and Y are partners in a firm sharing profits in the ratio of 5:3. On 1/3/2019. they admitted Z as a new partner. The new profit sharing ratio will be 4:3:2. Z brought in cash for his share of goodwill. The firm's goodwill on Z's admission was valued at Rs. 3,60,000. At the time of Z's admission goodwill existed in the books of the firm at Rs. 4,80,000. You are required to pass necessary journal entries

the books of the firm on Z's admission​

Answer 1

Answer:

JOURNAL

1. Stock a/c.... Dr. 60000

Debtors a/c... Dr. 80000

Land a/c.... Dr. 100000

Plant and machinery a/c... Dr. 40000

To Z's Capital a/c 130000

To Premium for goodwill a/c 150000

(Being capital and premium for goodwill brought in by C in the form of assets)

2. Premium for Goodwill a/c.... Dr. 150000

To X's Capital a/c 90000

To Y's Capital a/c 60000

(Being premium for goodwill distributed among partners in the ratio of 3:2)

Working Note:

1. Calculation of Z's share of goodwill:

Z's share of Goodwill= 600000 * 1/4= 150000

Z's share of capital = 280000 - 150000 = 130000

2. Distribution of premium for goodwill:

X's share= 3/5 * 150000= 90000

Y's share= 2/5 * 150000= 60000

Explanation:

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