# Volume-1 | Chapter-5 | Question: 31 to 35 | Admission Of A Partner | Ts grewal solution 2020-21 | Class-12th

#### Question 31:

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.

 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 A and B in Sacrificing Ratio)

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

#### Question 32:

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.

 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

#### 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.

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 from his capital account and distributed between Murty and Shah in sacrificing ratio i.ech 3:2)

(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 admission in old ratio) 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 Capital Account and distributed between Murty and Shah in sacrificing ratio i.ech 3:2)

#### 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.

 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)

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

#### 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

 Journal Date Particulars L.F. Debit Amount  ` Credit Amount  ` 2019 Apr.1 Mohan’s Capital A/c Dr. 1,21,500 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.