Page No 5.89:

Question 36:

Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill of the firm was valued at ` 5,50,000. Goodwill existed in the books of account at `1,00,000, which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary Journal entries on admission of Sooraj, if:
(a) Goodwill is not to be raised and written off; and
(b) Goodwill is to be raised and written off.

Answer:

Particulars	Madan	Gopal
Old Ratio	3/5	2/5
New Ratio	1/3	1/3
Gain/Sacrifice	(3/5 – 1/3)= 4/15 (Sacrifice)	(2/5 – 1/3)= 1/15 (Sacrifice)
Sacrificing Ratio	4:1

Case a) Goodwill is not be raised and written off:

In the books of the Madan, Gopal and Sooraj Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019
April 01	Sooraj’s Capital A/c (4,50,000 × 1/3)	Dr.		1,50,000
	To Madan’s Capital A/c (1,50,000× 4/5)				1,20,000
	To Gopal’s Capital A/c (1,50,000× 1/5)				30,000
	(Being adjustment for goodwill not brought by the partner)

Case b) Goodwill is to be raised and written off:

In the books of the Madan, Gopal and Sooraj Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019	Goodwill A/c	Dr.		4,50,000
April 01	To Madan’s Capital A/c (4,50,000 × 3/5)				2,70,000
	To Gopal’s Capital A/c (4,50,000 × 2/5)				1,80,000
	(Being goodwill raised in the books of accounts)
2019
April 01	Sooraj’s Capital A/c (4,50,000 × 1/3)	Dr.		1,50,000
	Madan’s Capital A/c (4,50,000 × 1/3)			1,50,000
	Gopal’s Capital A/c (4,50,000 × 1/3)			1,50,000
	To Goodwill A/c				4,50,000
	(Being adjustment for goodwill not brought by the partner)

Page No 5.89:

Question 37:

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.

Answer:

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

Page No 5.89:

Question 38:

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.

Answer:

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

Page No 5.89:

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, 2018 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.

Answer:

The journal entries are as follows:

Journal
Date 2018	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 1/4^th 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 = 1/4^th 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.

Page No 5.90:

Question 40:

Vinay and Naman are partners sharing profits in the ratio of 4 : 1. Their capitals were ` 90,000 and ` 70,000 respectively. They admitted Prateek for 1/3 share in the profits. Prateek brought ` 1,00,000 as his capital. Calculate the value of firm's goodwill.