Question

X and Y are partners sharing profits in the ratio of 3 : 1. They admit Z as a partner for 1/5 share who pays Rs. 40,000 as Goodwill. Pass the journal entry to distribute Goodwill. ​

Answer 1

Answer:

JOURNAL

1. Cash a/c.... Dr. 30000

To Premium for goodwill a/c 30000

(Being premium for goodwill brought in by Z)

2. Premium for Goodwill a/c... Dr. 30000

Y's Capital a/c Dr. 7500

To X's Capital a/c 37500

(Being premium for goodwill and Y's gain transferred to X)

Working Note:

1. Calculation of sacrificing ratio:

X's sacrifice= 3/4- 1/3= 5/12

Y's gain= 1/4- 1/3= -1/12

2. Z is admitted for 1/3rd share in profits. Z's share of goodwill= 30000

Hence, total goodwill of the firm= 30000 * 3/1= 90000

Y's share of gain= 90000 * 1/12= 7500

Hence, X gets= 30000+7500

= 37500