12th | Admission Of A Partner | Question No. 36 To 40 | Ts Grewal Solution 2023-2024

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, 2023 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.

The journal entries are as follows:
 

Journal
Date	Particulars		L.F.	Debit `	Credit `
2023
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. each = 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.

 

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.

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

 

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. 

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	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 ×5/1=   ` 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

Raising and Writing off Goodwill

 

Pass the necessary Journal entries by raising and writing off goodwill. Also prepare Partners’ Capital Accounts.

 

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Ankit's Capital A/c	Dr.		30,000
	Bobby's Capital A/c	Dr.		15,000
	To  Goodwill A/c				45,000
	(Being Goodwill written off)
	Bank A/c	Dr.		3,10,000
	To Kartik's Capital Ac				3,10,000
	(Being Capital and Premium for Goodwill brought.)
	Goodwill A/c	Dr.		2,40,000
	To Ankit's Capital A/c				1,60,000
	To Bobby's Capital A/c (Being Goodwill Raised)				80,000
	Ankit's Capital A/c	Dr.		1,20,000
	Bobby's Capital A/c	Dr.		60,000
	Kartik's Capital A/c	Dr.		60,000
	To Goodwill A/c				2,40,000
	(Being Goodwill written off)

 

Capital account
Particulars	Ankit	Bobby	Kartik	Particulars	Ankit	Bobby	Kartik
To Goodwill A/c	30,000	15,000	-	By Balance b/d	7,50,000	5,00,000	-
To Goodwill A/c	1,20,000	60,000	60,000	By Bank A/c	-	-	3,10,000
To Balance c/d	7,60,000	5,05,000	2,50,000	By Goodwill A/c	1,60,000	80,000	-
	9,10,000	5,80,000	3,10,000		9,10,000	5,80,000	3,10,000

 

 

Working Notes:

New Profit-sharing Ratio-2:1:1

Remaining share after Kartik is 1-1/4=3/4

Share of Ankit and Bobby is reaming share

Ankit = 3/4×2/3=6/12

Bobby = 3/4×1/3=3/12

 

Ankit	:	Bobby	:	Kartik
6/12	:	3/12	:	1/4
6/12	:	3/12	:	3/12
2/4	:	1/4	:	1/4

 

 

 

X and Y are equal partners in a firm. They admit Z into partnership and the new profit-sharing ratio between X, Y and Z is 4: 3:2. On Z's admission, goodwill of the firm is valued at 36,000. Z is unable to bring his share of goodwill premium in cash.

Pass necessary Journal entries for treatment of goodwill on Z's admission by raising and writing off goodwill. 18000; Y's Capital A/c by 18000.

Journal
Date	Particulars		L.F.	Debit    `	Credit    `
	Goodwill A/c	Dr.		36,000
	To X's Capital A/c				18,000
	To Y's Capital A/c (Being Goodwill Raised)				18,000
	X's Capital A/c	Dr.		16,000
	Y's Capital A/c	Dr.		12,000
	Z's Capital A/c	Dr.		8,000
	To Goodwill A/c				36,000
	(Being Goodwill written off)