Question

X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1 ratio. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y’s death the goodwill of the firm was valued at ₹60,000. Y’s share in the profits of the firm till the time of his death was to be calculated on the basis of previous year’s profit which was ₹ 1,50,000.
Pass necessary journal entries for the treatment of goodwill and Y’s share of profit at the time of his death.

Answer 1

Calculation of Y's Share of Goodwill :

Goodwill of the Firm= Rs 60,000

Y's Share of Goodwill = 60,000 × $\frac{2}{6}$= Rs 20,000

20,000 will be debited to X's & Z's Capital A/c in gaining ratio of 3 : 1

X will pay = 20,000 × $\frac{3}{4}$= Rs 15,000

Z will pay = 20,000 × $\frac{1}{4}$= Rs 5,000  

Calculation of Y's Share of Profit

Previous Year's Profit = Rs 1,50,000

Y's share of Profit (till death) = Previous Year's Profit × Y's Profit Share × 3 months (April 01, 2017 till June 30, 2017)

Y's share of Profit (till death) = 1,50,000 × 26 × $\frac{3}{12}$= Rs 12,500