12th | Admission of a Partner | Question No.  31 To 35 | Ts Grewal Solution 2022-2023

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.

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

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.

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

 

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.

(a) Where there is no Goodwill Account

(b) Goodwill appears at    ` 10,000

Working Notes;

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, 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.

Working Notes:

WN1: Calculation of Sacrificing Ratio

A :B :C=5:4:1 (Old Ratio)

A :B :C 😀 :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 =4/10−4/12=24−20/60=4/60 (Share of sacrifice)

C's share =1/10−2/12=6−10/60=−4/60 (Share of gain)

WN2: Adjustment of Goodwill
D's share in goodwill for 2/12th share=90,000

∴Total goodwill of the firm = 90,000×12/2=   ` 5,40,000

E's share in goodwill = 5,40,000×1/12=   ` 45,000

C's share in goodwill = 5,40,000×4/60=   ` 36,000

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.

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