12th | Ts grewal 2021-2022 Question 16 to 20 | Retirement of a partner

Page No 6.56:

Question 16:

A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B's retirement, the goodwill of the firm was valued at  ` 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.

 

Answer:

Journal

Particulars

L.F.

Debit

Amount

`

Credit

Amount

`

A’s Capital A/c

Dr.

 

15,000

 

C’s Capital A/c

Dr.

 

15,000

 

To B’s Capital A/s

 

 

30,000

(Being Adjustment B’s share of goodwill made)

 

 

 

Working Notes:

WN 1 Calculation of Gaining Ratio

Old Ratio (A, B and C) = 3 : 2 : 1

B retires from the firm.

New Ratio (A and C) = 2 : 1

Gaining Ratio=New Ratio − Old Ratio

A‘s share=2/3 -3/6 =4-3/6=1/6

B‘s share= 1/3 -1/6 =2-1/6=1/6

∴Gaining Ratio = 1 : 1

WN 2 Adjustment of Goodwill

Goodwill of the firm = ` 90,000

B’s share of goodwill =90,000×2/3=30,000

This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 1 : 1).

A’s and C’s capital will be debited =30,000×1/2=15000

 



Page No 6.57:

Question 17: Aman, Bimal and Deepak are partners sharing profits in the ratio of 2: 3: 5. The goodwill of the firm has been valued at `37,500. Aman retired. Bimal and Deepak decided to share profits equally in future.

Calculate gain/sacrifice of Bimal and Deepak on Aman's retirement and also pass necessary Journal entry for the treatment of goodwill. (CBSE 2019)

 

 

 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

Bimal’s capital a/c

Dr.

7,500

 

   To Amal’s capital a/c

7,500

 

(Being Goodwill adjusted)

 

 

 

 

 

 

 

Working notes;

WN1-

Calculation of gaining and sacrificing ratio

 

Amal

Bimal

Deepak

Old ratio

2                   :

3                :

5

New ratio

Retires

1                :

1

Bimal = 3/10-1/2=3-5/10= -2/10

Deepak =5/10-1/2=5-5/10= 0/10

Gaining ratio of Sunil and David=13:11

 

WN2-

Firms goodwill =37,500

Share of retiring partner Amal is 2/10

Share of Amal share =37,500×2/10=7,500

Bimal will compensate 7,500

 



Page No 6.57:

Question 18:

Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of  ` 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at  ` 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries. 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

 

Hanny’s Capital A/c

Dr.

 

30,000

 

 

Pammy’s Capital A/c

Dr.

 

20,000

 

 

Sunny’s Capital A/c

 

 

10,000

 

 

To Goodwill A/c

 

 

 

60,000

 

(Being Old goodwill written-off in old ratio)

 

 

 

 

 

 

 

 

 

 

 

Hanny’s Capital A/c

Dr.

 

14,000

 

 

Sunny’s Capital A/c

Dr.

 

14,000

 

 

To Pammy’s Capital A/c

 

 

 

28,000

 

(Being Adjustment for goodwill in gaining ratio)

 

 

 

 


Working Notes:

WN1: Calculation of Pammy’s Share in Goodwill

Pammy's share=Firm's Goodwill×Pammy's Profit SharePammy's share =84,000×26=28,000 to be borne by gaining partners in gaining ratio

WN2: Calculation of Gaining Ratio

Gaining Ratio = New Ratio − Old Ratio

Hanny's gain=2/3−3/6=1/6

Sunny's gain=1/3−1/6=1/6

Gaining Ratio=1:1

 



Page No 6.57:

Question 19:

A, B and C are partners sharing profits in the ratio of 4/9 : 3/9 : 2/9. B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at  ` 1,39,200. A and C agreed to pay him  ` 1,50,000 in full settlement of his claim. Record necessary Journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5 : 3.

 

Answer:

Journal

 

Date

Particulars

L.F.

Debit

Amount

`

Credit Amount

`

 

A’s Capital A/c

Dr.

 

5,850

 

 

C’s Capital A/c

Dr.

 

4,950

 

 

    To B’s Capital A/c

 

 

 

10,800

 

(Being Adjustment of B’s share of goodwill)

 

 

 

 


Working Notes

i. Calculation of B’s share of goodwill

A, B and C are sharing profits in ratio 4/9 : 3/9 : 2/9

B retires from the firm. Remaining partners agreed to pay him ` 1,50,000

B’s capital after making necessary adjustments ` 1,39,200

Therefore, Hidden Goodwill is ` (1,50,000 – 1,39,200) i.e. ` 10,800

ii Gaining Ratio

New profit sharing ratio between A and B is 5:3

A's Gain=5/8-5/9=13/72

C's Gain=3/8-2/9=11/72
gaining ratio 13:11

Thus, B’s share of goodwill will be brought in by A and C in the gaining ratio 13:11 i.e.

A’s capital will be debited =10,800×13/24=5850

C’s capital will be debited =10,800×11/24=4950

 



Page No 6.57:

Question 20:

M, N and O are partners in a firm sharing profits in the ratio of 3 : 2 : 1. Goodwill has been valued at ` 60,000. On N's retirement, M and O agree to share profits equally. Pass the necessary Journal entry for treatment of N's share of goodwill.

 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(`)

Credit

Amount

(`)

 

 

 

 

 

 

 

O’s Capital A/c

Dr.

 

20,000

 

 

     To N’s Capital A/c

 

 

 

20,000

 

(Being Adjustment of N’s share of goodwill)

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1:Calculation of Gaining Ratio

M :N :O=3:2:1(Old ratio)

M :O =1:1(New ratio)

Gaining Ratio = New Ratio - Old Ratio

M's Gain =1/2−3/6=3−3/6=0

O's Gain=1/2−1/6=3−1/6=2/6

WN2: Calculation of Retiring Partner’s Share of Goodwill

N's share of goodwill=60,000×2/6=` 20,000

N's share of goodwill will be brought by O only.

Therefore, O's Capital A/c will be debited with ` 20,000