Page No 5.89:
Question 31:
A and B are
partners sharing profits in the ratio of 2 : 1. They
admit C for 1/4th share in profits. C brings
in ` 30,000 for his capital and ` 8,000 out of his share of
` 10,000 for goodwill. Before
admission, goodwill appeared in books at
` 18,000. Give Journal entries
to give effect to the above arrangement.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
|
|
|
|
|
|
|
A’s Capital A/c |
Dr. |
|
12,000 |
|
|
B’s Capital A/c |
Dr. |
|
6,000 |
|
|
To Goodwill A/c |
|
|
18,000 |
|
|
(Goodwill written-off) |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
38,000 |
|
|
To C’s Capital A/c |
|
|
30,000 |
|
|
To Premium for Goodwill |
|
|
8,000 |
|
|
(C brought Capital and goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
8,000 |
|
|
C’s Capital A/c |
Dr. |
|
2,000 |
|
|
To A’s Capital A/c |
|
|
6,667 |
|
|
To B’s Capital |
|
|
3,333 |
|
|
(C’s share of goodwill
distributed between |
|
|
|
|
|
|
|
|
|
Working Notes:
WN1 Writing-off of Goodwill
A’s Capital Account will be debited by =18,000×2/3=12,000
B’s Capital Account will be debited by =18,000×1/3=6,000
WN2 Distribution of C’s share of Goodwill
A will get =10,000×2/3=6,667
B will get =10,000×1/3=3.333
Page No 5.89:
Question 32:
A and B are
partners sharing profits and losses in the ratio of 3 :
2. They admit C as partner in the firm for 1/4th share in profits
which he takes 1/6th from A and 1/12th from B. C
brings in only 60% of his share of firm's goodwill. Goodwill of the firm has
been valued at ` 1,00,000. Pass necessary journal
entries to record this arrangement.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
|
|
|
|
|
|
|
Bank A/c |
Dr. |
|
15,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
15,000 |
|
(Goodwill
brought in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium
for Goodwill A/c |
Dr. |
|
15,000 |
|
|
To A’s Capital A/c |
|
|
|
10,000 |
|
To B’s Capital A/c |
|
|
|
5,000 |
|
(Goodwill
distributed between A & B in sacrificing ratio) |
|
|
|
|
|
|
|
|
|
|
|
C’s Capital A/c |
Dr |
|
10,000 |
|
|
To A’s Capital A/c |
|
|
|
6,667 |
|
To B’s Capital A/c |
|
|
|
3,333 |
|
(Goodwill
adjusted) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of Sacrificing Ratio
A's sacrifice =16×22=212
B's sacrifice =112
∴ Sacrificing Ratio between A and B = 2:1
WN2: Calculation of share in goodwill of new partner
C's share in goodwill=1,00,000×14= ` 25,000
Goodwill brought in cash ` 15,000(25,000×60%)
Remaining goodwill of
` 10,000 will be adjusted through C's Capital A/c
Page No 5.89:
Question 33:
On the admission of Rao, goodwill of Murty and Shah is valued at ` 30,000. Rao
is to get 1/4th share of profits. Previously Murty
and Shah shared profits in the ratio of 3 : 2. Rao is unable to bring amount of goodwill. Give Journal
entries in the books of Murty and Shah when:
(a) there is no Goodwill Account and
(b) Goodwill appears in the books at
` 10,000.
Answer:
WN1: Calculation of Rao’s share of Goodwill
Rao’s share of goodwill=30,000×1/4=7,500
WN2: Adjustment of Rao’s share of Goodwill
Murty will get =7,500×3/5=4,500
Shah will get =7,500×2/5=3,000
(a) Where there is no Goodwill Account
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
|
|
|
|
|
|
|
Rao’s Capital A/c |
Dr. |
|
7,500 |
|
|
To Murty’s Capital A/c |
|
|
4,500 |
|
|
To Shah’s Capital A/c |
|
|
3,000 |
|
|
(Rao’s
share of goodwill charged |
|
|
|
|
|
|
|
|
|
|
(b) Goodwill appears at ` 10,000
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
|
|
|
|
|
|
|
Murty’s Capital A/c |
Dr. |
|
6,000 |
|
|
Shah’s Capital A/c |
Dr. |
|
4,000 |
|
|
To Goodwill A/c |
|
|
10,000 |
|
|
(Goodwill written-off at the time
of Rao’s |
|
|
|
|
|
|
|
|
|
|
|
Rao’s Capital A/c |
Dr. |
|
7,500 |
|
|
To Murty’s Capital A/c |
|
|
4,500 |
|
|
To Shah’s Capital A/c |
|
|
3,000 |
|
|
(Rao’s
share of goodwill charged from his |
|
|
|
|
|
|
|
|
|
Page No 5.89:
Question 34:
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.
Answer:
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 =410−412=24−2060=460 (Share of sacrifice)
C's share =110−212=6−1060=−460 (Share of gain)
WN2: Adjustment of Goodwill
D's share in goodwill for 212 th share=90,000
∴Total goodwill of the firm = 90,000×122= ` 5,40,000
E's share in goodwill = 5,40,000×112= ` 45,000
C's share in goodwill = 5,40,000×460= ` 36,000
Page No 5.89:
Question 35:
Mohan and Sohan were partners in a firm sharing
profits and losses in the ratio of 3 : 2. They
admitted Ram for 1/4th share on 1st April, 2019. It was agreed that goodwill of
the firm will be valued at 3 years' purchase of the average profit of last 4
years ended 31st March, were `
50,000 for 2015-16, `
60,000 for 2016-17, `
90,000 for 2017-18 and `
70,000 for 2018-19. Ram did not bring his share of goodwill premium in cash.
Record the necessary Journal entries in the books of the firm on Ram's
admission when:
(a) Goodwill appears in the books at
` 2,02,500.
(b) Goodwill appears in the books at
` 2,500.
(c) Goodwill appears in the books at
` 2,05,000.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
2019 |
|
|
|
|
|
|
Sohan’s Capital A/c |
Dr. |
|
81,000 |
|
|
To Goodwill A/c |
|
|
|
2,02,500 |
|
(Old
goodwill written-off in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
Ram’s
Capital A/c |
Dr. |
|
50,625 |
|
|
To Mohan’s Capital A/c |
|
|
|
30,375 |
|
To Sohan’s Capital A/c |
|
|
|
20,250 |
|
(Premium
not brought debited to Ram and credited to sacrificing partners) |
|
|
|
|
|
|
|
|
|
|
|
Mohan’s
Capital A/c |
Dr. |
|
1,500 |
|
|
Sohan’s Capital A/c |
Dr. |
|
1,000 |
|
|
To Goodwill A/c |
|
|
|
2,500 |
|
(Old
goodwill written-off in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
Ram’s
Capital A/c |
Dr. |
|
50,625 |
|
|
To Mohan’s Capital A/c |
|
|
|
30,375 |
|
To Sohan’s Capital A/c |
|
|
|
20,250 |
|
(Premium
not brought debited to Ram and credited to sacrificing partners) |
|
|
|
|
|
|
|
|
|
|
|
Mohan’s
Capital A/c |
Dr. |
|
1,23,000 |
|
|
Sohan’s Capital A/c |
Dr. |
|
82,000 |
|
|
To Goodwill A/c |
|
|
|
2,05,00 |
|
(Old
goodwill written-off in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
Ram’s
Capital A/c |
Dr. |
|
50,625 |
|
|
To Mohan’s Capital A/c |
|
|
|
30,375 |
|
To Sohan’s Capital A/c |
|
|
|
20,250 |
|
(Premium
not brought debited to Ram and credited to sacrificing partners) |
|
|
|
|
Working Notes:
WN1: Calculation of Goodwill
Goodwill=Average Profits×Number of Years' Purchase
Average Profits=Total ProfitsNumber of Years
=50,000+60,000+90,000+70,000/4=2,70,000/4= ` 67,500
Goodwill=67,500×3= ` 2,02,500
Ram's share=2,02,500×14=50,625
Note: Since no information is given about the share of
sacrifice, it is assumed that the old partners are sacrificing in their old
profit sharing ratio.