12th | Admission of a Partner | Question No.  21 To 25 | Ts Grewal Solution 2022-2023

Give Journal entries to record the following arrangements in the books of the firm:
(a) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium (goodwill) of    ` 2,000 for 1/4th share of the profits, shares shares of B and C remain as before.
(b) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of    ` 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.

(a)

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Cash A/c	Dr.		2,000
	To Premium for Goodwill A/c				2,000
	(D brought Premium for Goodwill)
	Premium for Goodwill A/c	Dr.		2,000
	To B’s Capital A/c				1,200
	To C’s Capital A/c				800
	(Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2)

Working Note:

Distribution of premium for Goodwill-

B will get =2,000×3/5=1,200

A will get =2,000×2/5=800

 

(b)

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Cash A/c	Dr.		2,100
	To Premium for Goodwill A/c				2,100
	(D brought his share of goodwill in cash)
	Premium for Goodwill A/c	Dr.		2,100
	To B’s Capital A/c				1,400
	To C’s Capital A/c				700
	(Premium for Goodwill brought distributed between B and C in sacrificing Ratio i.e. 2:1)

Working Note:

WN1

	B		C
Sacrificing ratio =	1/6	:	1/12
	2	:	1

WN2

Distribution of Premium for Goodwill-

B will get =21,00×2/3=1.400

C will get =21,00×1/3=700

 

B and C are in partnership sharing profits and losses as 3 : 1. They admit D into the firm, D pays premium of    ` 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally. Draft Journal entries showing appropriations of the premium money.

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Cash A/c	Dr.		15,000
	To Premium for Goodwill A/c				15,000
	(D brought his share of goodwill in cash)
	Premium for Goodwill A/c	Dr.		15,000
	To B’s Capital A/c				15,000
	(Premium for goodwill transferred to B’s Capital)
	C’s Capital A/c	Dr.		3,750
	To B’s Capital A/c				3,750
	(Goodwill charged from C’s Capital Account due to his gain in profit sharing)

WN1

Calculation of Sacrificing Ratio:

Let combined share of all partners after D’s admission be = 1

Combined share of B and C after C’s admission be = 1

=1-1/3

=2/3

 

B and C each share of profit after D’s admission will be

=2/3×1/2

=2/6 =1/3 each

 

Sacrificing Ratio =Old ratio- new ratio

 

A’s	=3/4-1/3
	=5/12 (Sacrifice)
B’s	=1/4-1/3
	=-1/12(gain)

WN2

C is gaining in new the firm. Hence, C’s gain in goodwill will be debited to his capital and given to B (sacrificing partner).

Goodwill of the firm= premium of Goodwill brought by D × reciprocal of D’s share

=15,000×3/1=45,000

C’s share of gain in goodwill= goodwill of the firm × C’s share of gain

=45,000×1/12=3,750

 

Geeta and Sunita are partners in a firm sharing profits in the ratio of 3 : 2. They admit Anita as a new partner. The new profit-sharing ratio between Geeta, Sunita and Anita will be 5 : 3 : 2. Anita brought in  `25,000 for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Cash A/c	Dr.		25,000
	To Premium for Goodwill A/c				25,000
	(Anita brought his share of goodwill in cash)
	Premium for Goodwill A/c	Dr.		25,000
	To Geeta’s Capital A/c				12,500
	To Sunita’s Capital A/c				12,500
	(Ania’s share of Goodwill distributed in Geeta and Sunita in their sacrificing Ratio)

Working Notes:

WN1

Calculating of Sacrificing Ratio

Sacrificing Ratio =Old ratio- new ratio

	Geeta’s	=3/5-5/10
		=1/10
	Sunita’s	=2/5-3/10
		=1/10
			Geeta		Sunita
Sacri ficing Ratio =			1/10	:	1/10
			1		1

WN2  

Distribution of Geeta’s share of Goodwill-

Geeta and Sunita each will get =25,000×1/2=12,500

 

A and B are in partnership sharing profits and losses in the ratio of 5 : 3. C is admitted as a partner who pays    ` 40,000 as capital and the necessary amount of goodwill which is valued at ` 60,000 for the firm. His share of profits will be 1/5th which he takes 1/10th from A and 1/10th from B.
Pass Journal entries and also calculate future profit-sharing ratio of the partners.

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Cash A/c	Dr.		52,000
	To C’s Capital A/c				40,000
	To Premium for Goodwill A/c				12,000
	(C brought Capital and his share of goodwill in cash)
	Premium for Goodwill A/c	Dr.		12,000
	To A’s Capital A/c				6,000
	To B’s Capital A/c				6,000
	(C’s share of Goodwill distributed in A and B)

Working Notes-

WN1

	A		B
Sacrificing Ratio =	1/10	:	1/10
	1		1

WN2

Calculation of new profit sharing Ratio

	A	B
OLD RATION	5  :	3

New ratio= old ratio – sacrificing ratio

 

	A’s	=5/8-1/10
		=21/40
	B’s	=3/8-1/10
		=11/40
			X			Y		Z
New profit sharing ratio =			21/40	:		11/40	:	1/5
=			21/40	:		11/40	:	8/40

WN3

Distribution of C’s share of Goodwill (in Sacrificing Ratio)

A and B each will get =12,000×1/2=6,000

 

Adil and Bhavya are partners sharing profits and losses in the ratio of 7 : 5. They admit Cris, their Manager, into partnership who is to get 1/6th share in the business. Cris brings in    ` 10,000 for his capital and    ` 3,600 for the 1/6th share of goodwill which he acquires 1/24th from Adil and 1/8th from Bhavya. Profits for the first year of the new partnership was    ` 24,000. Pass necessary Journal entries for Cris's admission and apportion the profit between the partners.

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Cash A/c	Dr.		13,600
	To Cris’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,600
	(Cris brought capital and his share of goodwill)
	Premium for Goodwill A/c	Dr.		3,600
	To Adil’s Capital A/c				900
	To Bhavya’s Capital A/c				2,700
	(Cris’s share of goodwill transferred to Adil and Bhavya in their sacrificing ratio i.e. 3:1)
	Profit and Loss Appropriation A/c	Dr.		24,000
	To Adil’s Capital A/c				13,000
	To Bhavya’s Capital A/c				7,000
	To Cris’s Capital A/c				4,000
	(Profit after Cris’s admission distributed)

Working Note:

WN1

	Adil		Bhavya
Sacrificing Ratio =	1/24	:	1/8
	1	:	3

WN2

Distribution of Cris’s share of Goodwill (in sacrificing ratio)

Adil will get =3,600×1/4=900

Bhavya will get =3,600×3/4=2,700

WN3

Calculation of New Profit Sharing Ratio

New ratio= old ratio – Sacrificing Ratio

	Adil’s	=7/12-1/24
		=13/24
	Bhavya’s	=5/12-1/8
		=7/24
			Adil			Bhavya		Cris
New profit sharing ratio=			13/24	:		7/24	:	1/6
=			13/24	:		7/24	:	4/24
=			13	:		7	:	4

WN4

Distribution of Profit earned after Cris’s admission (in new ratio)

Adil will get =24,000×13/24=13,000

Bhavya will get =24,000×7/24=7,000

Cris will get =24,000×4/24=4,000