# Commerce Accountancy Chapter 5 - Admission Of A Partner

#### Question 21:

Give Journal entries to record the following arrangements in the books of the firm:
(a) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium (goodwill) of
` 2,000 for 1/4th share of the profits, shares shares of B and C remain as before.
(b) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of
` 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.

(a)

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 2,000 To Premium for Goodwill A/c 2,000 (D brought Premium for Goodwill) Premium for Goodwill A/c Dr. 2,000 To B’s Capital A/c 1,200 To C’s Capital A/c 800 (Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2)

Working Note:

B will get =2,000×3/5=1,200

A will get =2,000×2/5=800

(b)

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 2,100 To Premium for Goodwill A/c 2,100 (D brought his share of goodwill in cash) Premium for Goodwill A/c Dr. 2,100 To B’s Capital A/c 1,400 To C’s Capital A/c 700 (Premium for Goodwill brought distributed between B and C in sacrificing Ratio i.e. 2:1)

Working Note:

WN1

 B C Sacrificing ratio = 1/6 : 1/12 2 : 1

WN2

B will get =21,00×2/3=1.400

C will get =21,00×1/3=700

#### Question 22:

B and C are in partnership sharing profits and losses as 3 : 1. They admit D into the firm, D pays premium of    ` 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally. Draft Journal entries showing appropriations of the premium money.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 15,000 To Premium for Goodwill A/c 15,000 (D brought his share of goodwill in cash) Premium for Goodwill A/c Dr. 15,000 To B’s Capital A/c 15,000 (Premium for goodwill transferred to B’s Capital) C’s Capital A/c Dr. 3,750 To B’s Capital A/c 3,750 (Goodwill charged from C’s Capital Account due to his gain in profit sharing)

WN1

Calculation of Sacrificing Ratio:

Let combined share of all partners after D’s admission be = 1

Combined share of B and C after C’s admission be = 1

=1-1/3

=2/3

B and C each share of profit after D’s admission will be

 =2/3×1/2 =2/6 =1/3 each

Sacrificing Ratio =Old ratio- new ratio

 A’s =3/4-1/3 =5/12 (Sacrifice) B’s =1/4-1/3 =-1/12(gain)

WN2

C is gaining in new the firm. Hence, C’s gain in goodwill will be debited to his capital and given to B (sacrificing partner).

Goodwill of the firm= premium of Goodwill brought by D × reciprocal of D’s share

=15,000×3/1=45,000

C’s share of gain in goodwill= goodwill of the firm × C’s share of gain

=45,000×1/12=3,750

#### Question 23:

Geeta and Sunita are partners in a firm sharing profits in the ratio of 3 : 2. They admit Anita as a new partner. The new profit-sharing ratio between Geeta, Sunita and Anita will be 5 : 3 : 2. Anita brought in  `25,000 for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 25,000 To Premium for Goodwill A/c 25,000 (Anita brought his share of goodwill in cash) Premium for Goodwill A/c Dr. 25,000 To Geeta’s Capital A/c 12,500 To Sunita’s Capital A/c 12,500 (Ania’s share of Goodwill distributed in Geeta and Sunita in their sacrificing Ratio)

Working Notes:

WN1

Calculating of Sacrificing Ratio

Sacrificing Ratio =Old ratio- new ratio

 Geeta’s =3/5-5/10 =1/10 Sunita’s =2/5-3/10 =1/10 Geeta Sunita Sacri ficing Ratio = 1/10 : 1/10 1 1

WN2

Distribution of Geeta’s share of Goodwill-

Geeta and Sunita each will get =25,000×1/2=12,500

#### Question 24:

A and B are in partnership sharing profits and losses in the ratio of 5 : 3. C is admitted as a partner who pays    ` 40,000 as capital and the necessary amount of goodwill which is valued at    ` 60,000 for the firm. His share of profits will be 1/5th which he takes 1/10th from A and 1/10th from B.
Pass Journal entries and also calculate future profit-sharing ratio of the partners.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 52,000 To C’s Capital A/c 40,000 To Premium for Goodwill A/c 12,000 (C brought Capital and his share of goodwill in cash) Premium for Goodwill A/c Dr. 12,000 To A’s Capital A/c 6,000 To B’s Capital A/c 6,000 (C’s share of Goodwill distributed in A and B)

Working Notes-

WN1

 A B Sacrificing Ratio = 1/10 : 1/10 1 1

WN2

Calculation of new profit sharing Ratio

 A B OLD RATION 5  : 3

New ratio= old ratio – sacrificing ratio

 A’s =5/8-1/10 =21/40 B’s =3/8-1/10 =11/40 X Y Z New profit sharing ratio = 21/40 : 11/40 : 1/5 = 21/40 : 11/40 : 8/40

WN3

Distribution of C’s share of Goodwill (in Sacrificing Ratio)

A and B each will get =12,000×1/2=6,000

#### Question 25:

X and Y are partners sharing profits in the ratio of 3: 1. Z is admitted as a partner for which he pays    ` 30,000 for goodwill in cash. X, Y and Z  decide to share the future profits equally.

Pass an adjustment Journal entry to give effect to the above arrangement.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 30,000 To Premium for Goodwill A/c 30,000 (X brought his share of goodwill) Premium for Goodwill A/c Dr. 30,000 Y’s Capital A/c Dr. 7,500 To X’s Capital A/c 37,500 (Y and Z share of gain in goodwill transferred to X’s Capital Account)

Working Notes:

WN1

Calculation of Sacrificing Ratio

New ratio= old ratio – Sacrificing Ratio

 X’s =2/4-1/3 =5/12 Y’s =1/4-1/3 =-1/12

WN2

Goodwill of the firm on the basis of Z’s share

Share of Z = 1/3

Premium he brought for his share =30,000

So, firms’s goodwill=30,000×3/1=90,000

X will get as a goodwill = Z’s share of Goodwill + Y’s gain in Goodwill=30,000×3/1

=90,000

B’s  share in goodwill =90,000×1/12=7,500

= 30,000 + 7,500

=    ` 37,500