# Commerce Accountancy Chapter 5 - Admission Of A Partner

#### Question 36:

A, B and C are in partnership sharing profits and losses in the ratio of 5 : 4 : 1 respectively. Two new partners D and E are admitted. The profits are now to be shared in the ratio of 3 : 4 : 2 : 2 : 1 respectively. D is to pay    ` 90,000 for his share of Goodwill but E has insufficient cash to pay for Goodwill. Both the new partners introduced    ` 1,20,000 each as their capital. You are required to pass necessary Journal entries.

 Journal Date Particulars L.F. Debit Amount  ` Credit Amount  ` Bank A/c Dr 3,30,000 To D’s Capital A/c 1,20,000 To E’s Capital A/c 1,20,000 To Premium for Goodwill A/c 90,000 (Capital and Goodwill brought in cash) C’s Capital A/c Dr. 36,000 E’s Capital A/c Dr. 45,000 Premium for Goodwill A/c Dr. 90,000 To A’s Capital A/c 1,35,000 To B’s Capital A/c 36,000 (Goodwill adjusted)

Working Notes:

WN1: Calculation of Sacrificing Ratio

A :B :C=5:4:1 (Old Ratio)

A :B :C :D :E=3:4:2:2:1 (New Ratio)

Sacrificing (or Gaining) Ratio = Old Ratio - New share

=510−312=30−1560=1560 (Share of sacrifice)

B's share =4/10−4/12=24−20/60=4/60 (Share of sacrifice)

C's share =1/10−2/12=6−10/60=−4/60 (Share of gain)

D's share in goodwill for 2/12th share=90,000

Total goodwill of the firm = 90,000×12/2=   ` 5,40,000

E's share in goodwill = 5,40,000×1/12=   ` 45,000

C's share in goodwill = 5,40,000×4/60=   ` 36,000

#### Question 37:

A and B are partners in a firm with capital of    ` 60,000 and    ` 1,20,000 respectively. They decide to admit C into the partnership for 1/4th share in the future profits. C is to bring in a sum of    ` 70,000 as his capital. Calculate amount of goodwill.

Actual Capital of the firm after admission of C = A’s Capital + B’s Capital + C’s Capital

= 60,000 + 1, 20,000 + 70,000 =    ` 2, 50,000

Capitalised value of the firm on the basis C’s share= 70,000×4/1=2,80,000

Goodwill= Capitalised value of the firm – actual capital of the firm

=2,80,000-2,50,000

=30,000

#### Question 38:

Anil and Sunil are partners in a firm with fixed capitals of    ` 3,20,000 and    ` 2,40,000 respectively. They admitted Charu as a new partner for 1/4th share in the profits of the firm on 1st April, 2012. Charu brought    ` 3,20,000 as her share of capital.
Calculate value of goodwill and record necessary Journal entries.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Bank A/c Dr. 3,20,000 To Charu’s Capital A/c 3,20,000 (Capital brought in by Charu) Charu’s Current A/c Dr. 1,00,000 To Anil’s Current A/c 50,000 To Sunil’s Current A/c 50,000 (Charu’s share of goodwill adjusted through current accounts)

Working Notes: Calculation of Hidden Goodwill

 Total capital of the firm on the basis od Charu’s capital=3,20,000×4/1= 12,80,000 Less- adjusted cpital of partners + new partner’s capital= (8,80,000) 4,00,000

Charu’s share of goodwill=4,00,000×1/4=1,00,000

#### Question 39:

Bhuwan and Shivam were partners in a firm sharing profits in the ratio of 3 : 2. Their capitals were    ` 50,000 and    ` 75,000 respectively. They admitted Atul on 1st April, 2021 as a new partner for 1/4th share in future profits. Atul brought    ` 75,000 as his capital. Calculate the value of goodwill of the firm and record necessary Journal entries for the above transactions on Atul's admission.

The journal entries are as follows:

 Journal Date 2021 Particulars L.F. Debit Amount  ` Credit Amount  ` April 1 Bank/Cash A/c Dr. 75,000 To Atul’s Capital A/c 75,000 (for capital brought on Atul’s admission) April 1 Atul’s Capital A/c Dr. 25,000 To Bhuwan’s Capital A/c 15,000 To Shivam’s Capital A/c 10,000 (for goodwill distributed in sacrificing ratio of 3:2)

Here, Atul is entered into partnership for 1/4th share in future profits. He contributes
` 75,000 towards his share of capital.

Taking Atul’s capital as the base, we can calculate the firm’s capital as
Firm's Capital = New Partner's Capital × Reciprocal of his share
i.ech = 75,000 × 4 =
` 3,00,000
However, the total capital as at that date is
`  2,00,000 (i.e. 50,000 + 75,000 + 75,000)
So, the difference of 1,00,000 is hidden goodwill.
Atul’s share in goodwill = 1/4th of 1,00,000 =
` 25,000

Note: In this case, as no information is provided for the share sacrificed by the old partners, so it is assumed that the old partners are sacrificing in their old profit share.

#### Question 40:

X and Y are partners with capitals of    ` 50,000 each. They admit Z as a partner for 1/4th share in the profits of the firm. Z brings in    ` 80,000 as his share of capital. The Profit and Loss Account showed a credit balance of    ` 40,000 as on date of admission of Z.
Give necessary journal entries to record the goodwill.

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + undistributed Profit +

Z’s Capital

= 50,000 + 50,000 + 40,000 + 80,000

=    ` 2,20,000

Capitalised value of the firm on the basis Z’s share= 80,000×4/1=3,20,000

Goodwill= Capitalised value of the firm – T  otal captial after z’s admission

=3,20,000-2,20,000=1,00,000