Question

X and y shared profit and losses in the ratio of 3 : 2 . With effect from 1st April 2020 they agreed to share profit equally. Goodwill of the phone was valued at rupees 60000. The adjustment entry will be

Answer 1

Answer:

New profit sharing ratio is 1/2:1/2.

Share of Goodwill as per old ratio

X = Rs.60000 *3 = Rs.36000

5

Y = Rs.60000 *2 = Rs.24000

5

As per new ratio, Share of Goodwill will be Rs.30000 to X and Rs.30000 to Y. Hence an adjustment entry need to be passed for adjustment of Goodwill for Rs.6000.

X A/c Dr. 6000

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Answer 2

Old ratio (X and Y) = 3 : 2

New ratio (X and Y) = 1 : 1

Gaining ratio = New ratio - Old ratio

X's gain = (1/2) - (3/5)

= -1/10 (sacrifice)

Y's gain = (1/2) - (2/5)

= 1/10

Total goodwill of the firm = Rs. 60000

Amount of goodwill will be compensated by gaining partner to sacrificing partner in their gaining and sacrificing ratio.

Therefore, necessary single adjustment entry will be:

Y's capital A/c Dr. 6000

To X's capital A/c 6000