X and Y are partners in a firm with
capital of Rs 1,80,000 and Rs
2,00,000. Z was admitted for 1/3rd
share profits and brings Rs 3,40,000
as capital, calculate the amount of
goodwill: *
Rs 3,00,000
O
Rs 2,40,000
O Rs 1,00,000
O Rs 1,50,000
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12th
Accountancy
Reconstitution of a Partnership Firm - Admission of a Partner
Accounting Treatment of Accumulated Profits and Losses and Reserves
X and Y are partners with c...
ACCOUNTANCY
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Asked on December 26, 2019 by
Sambit Bavari
X and Y are partners with capitals of Rs.50,000 each. They admit Z as a partner with 1/4
th
share in the profits of the firm. Z brings in Rs.80,000 as his share of capital. The Profit and Loss Account showed a credit balance of Rs.40,000 as on date of admission of Z.
Give necessary Journal entries to record the goodwill.
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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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E and F were partners in firm sharing profits in the ratio of 3:1. They admitted G and will share future profits equally. G brought Rs.50,000 in cash and machinery worth Rs.70,000 fir his share of profit as premium of goodwill.
pass necessary Journal entries in the books of the firm.
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Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2:1 as at 31
st
March,2018:
Liabilities (Rs.) Assets (Rs.) Capital A/c:
A 15,000
B 10,000
Sundry Creditors
25,000
32,950 Building
Plant and Machinery
Stock
Sundry Debtors
Cash in Hand 25,000
17,500
10,000
4,850
600 57,950 57,950They agree to admit C into the partnership on the following terms:
(a) C was to bring in Rs.7,500 as his capital and Rs.3,000 as goodwill for 1/4
th
share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A provision for Doubtful Debts was to be created in respect of Sundry Debtors Rs.375.
(d) Building Account was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment Account (or Revaluation Account), Capital Accounts and Balance Sheet of the new firm
Explanation:
340000*3/1=1020000
1020000-180000-200000-340000