Question

XX, Y and Z are partners sharing profit and loss in the ratio of 4:3:2. Y retires and the
goodwill is valued at 372,000. Calculate Y's share of goodwill and pass necessary journal
entry for the same without opening the goodwill account. X and Z decide to share the
future profit and loss in the ratio of 5:3.​

Answer 1

Answer:

1. valuation of Goodwill:- calculation of average profit

Total profits of 5 years= ( 70,000+85,000+45,000+35,000-10,000)/5

= 2,25,000/5 = 45,000

2. Value of goodwill based on 2 years purchase=

2 * 45,000= 90,000

Goodwill A/c 90,000

To X' capital A/c 45,000

To Y' capital A/c 27,000

To Z' capital A/c 18,000

( Goodwill distributed in ratio 5:3:2)

X' capital A/c 30,000

Y's capital A/c 30,000

Z's capital A/c 30,000

To Goodwill A/c 90,000

( Goodwill written off in 1:1:1)

Gaining Ratio = New ratio - Old ratio

X = 1/3 - 5/10 = -5/30

Y = 1/3 - 3/10 = 1/30

Z=1/3 - 2/10 = 4/30

X is the sacrificing partner and Y and Z are the gaining partner. So, Y and Z needs to compensate X.

Goodwill = 90,000 * 5/30= 15,000. So, now 15,000 amount of goodwill will be compensated to X by Y and Z in the ratio of 1:4 i.e gaining ratio.

Y's capital A/c 3000

Z's Capital A/c 12,000

To X's capital A/c 15,000

Explanation:

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