Page No 5.90:

Question 41:

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.

Answer:

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

Page No 5.90:

Question 42:

Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings ` 5,00,000 as his share of capital. The value of the total assets of the firm was ` 15,00,000 and outside liabilities were valued at ` 5,00,000 on that date. Give necessary Journal entry to record goodwill at the time of Ajay's admission. Also show your workings.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
	Ajay’s Capital A/c	Dr.		2,00,000
	To Asin’s Capital A/c				1,00,000
	To Shreya’s Capital A/c				1,00,000
	(Ajay’s share of goodwill distributed among the old partners in their sacrificing ratio 1:1.)

Working Notes:

Calculation of Goodwill brought in by Ajay

Value of firm’s goodwill	= Capitalised value of the firm – Net worth
Capitalised value of the firm	= Share of Ajay's capital × Reciprocal of Ajay's share = 5,00,000 ×51= ` 25,00,000
Net worth of the new firm	= Total assets-Outside liabilities + Ajay's capital = 15,00,000 - 5,00,000 + 5,00,000= ` 15,00,000
Value of firm's goodwill	= Capitalised value of firm - Net worth of the new firm =25,00,000 - 15,00,000 = ` 10,00,000
Ajay's share of goodwill	= 10,00,000 × 1/5 = ` 2,00,000

Page No 5.90:

Question 43:

Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in ` 20,000 as capital and ` 4,000 as his share of goodwill premium. Give the necessary Journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.

Answer:

Journal Entries
S.No.	Particulars		L.F.	Debit Amount `	Credit Amount `
Case (a)
	Cash A/c	Dr.		24,000
	To Ghosh's Capital A/c				20,000
	To Premium for Goodwill A/c				4,000
	(Capital and Goodwill his share broughtby Ghosh)

	Premium for Godwill A/c	Dr.		4,000
	To Verma's Capital A/c				2,500
	To Sharma's Capital A/c				1,500
	(Goodwill brought by Ghosh credited to Old Partnersin Sacrificing ratio)

Case (b)	Cash A/c	Dr.		24,000
	To Ghosh Capital A/c				20,000
	To Premium for Goodwill A/c				4,000
	(Capital and Goodwill brought by Ghosh for (1/5)share of profit)

	Premium for Goodwill A/c	Dr.		4,000
	To Verma's Capital A/c				2,500
	To Sharma's Capital A/c				1,500
	(Goodwill brought by Ghosh credited in Old Partner in Sacrificing Ratio)

	Verma's Capital A/c	Dr.		2,500
	Sharma's Capital A/c	Dr.		1,500
	To Cash A/c				4,000
	(Amount of Premium for Goodwill withdrawn byOld Partners)

Case (c)	Cash A/c	Dr.		24,000
	To Ghosh's Capital A/c				20,000
	To Premium for Goodwill A/c				4,000
	(Capital and Goodwill brought by Ghosh for (1/5)share of profit)

	Premium for Goodwill A/c	Dr.		4,000
	To Verma's Capital A/c				2,500
	To Sharma's Capital A/c				1,500
	(Premium for Goodwill credited to Old Partner's Capital Account in sacrificing ratio)

	Verma's Capital A/c	Dr.		1,250
	Sharma's Capital A/c			750
	To Cash A/c				2,000
	(Half of the amount of premium for goodwill withdrawn by Old partners)

Case (d)	No entry: Goodwill was not brought into firm

Page No 5.90:

Question 44:

Disha and Divya are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital of Disha is ` 4,80,000 and of Divya is ` 3,00,000. On 1st April, 2019 they admitted Hina as a new partner for 1/5th share in future profits. Hina brought ` 3,00,000 as her capital. Calculate value of goodwill of the firm and record necessary Journal entries on Hina's admission.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019 April 1	Bank A/c	Dr.		3,00,000
	To Hina’s Capital A/c				3,00,000
	(Capital brought in by Hina)
April 1	Hina’s Current A/c	Dr.		84,000
	To Disha’s Current A/c				50,400
	To Divya’s Current A/c				33,600
	(Hina’s Share of Goodwill adjusted through current accounts)

Working Note:

Calculation of Hidden Goodwill

Total capital of the firm on the basis of Hina’s capital=(3,00,000×5/1)=	15,00,000
Less- adjusted cpital of partners + new partner’s capital=	(10,80,000)
	4,20,000

Hina’s share of goodwill=4,20,000×1/5=84,000

Page No 5.90:

Question 45:

E and F were partners in a firm sharing profits in the ratio of 3 : 1. They admitted G as a new partner on 1st April, 2019 for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought ` 50,000 in cash and machinery valued at ` 70,000 as premium for goodwill.
Pass necessary Journal entries in the books of the firm.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019 April 1	Cash A/c	Dr.		50,000
	Machinery A/c	Dr.		70,000
	To Premium for Goodwill A/c				1,20,000
	(G brought cash ` 50,000 and Machinery ` 70,000 for his share of Goodwill)

April 1	Premium for Goodwill A/c	Dr.		1,20,000
	To E’s Capital A/c				1,20,000
	(G share of goodwill transferred to E’s Capital Account)

April 1	F’s Capital A/c	Dr.		30,000
	To E’s Capital A/c				30,000
	(F’s share of gain in goodwill charged from his capital and transferred to E’s capital)