Hidden Goodwill

 

Question 21:

A, B and C are partners sharing profits in the ratio of 4/9 : 3/9 : 2/9. B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at ₹ 1,39,200. A and C agreed to pay him ₹ 1,50,000 in full settlement of his claim. Record necessary Journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5 : 3.

 

Answer:

Working Notes
i. Calculation of B’s share of goodwill
A, B and C are sharing profits in ratio 4/9 : 3/9 : 2/9
B retires from the firm. Remaining partners agreed to pay him ₹ 1,50,000
B’s capital after making necessary adjustments ₹ 1,39,200
Therefore, Hidden Goodwill is ₹ (1,50,000 – 1,39,200) i.e. ₹ 10,800

ii Gaining Ratio
New profit sharing ratio between A and B is 5:3
A's Gain=5/8-5/9=13/72

C's Gain=3/8-2/9=11/72
Gaining ratio 13:11

Thus, B’s share of goodwill will be brought in by A and C in the gaining ratio 13:11 i.e.

A’s capital will be debited =10,800×13/24=5850

C’s capital will be debited =10,800×11/24=4950

 

Question 22:

Shivam, Kapil and Deepak are partners sharing profits in the ratio of 3:1:2. On 31st March, 2026, Kapil retired and his capital account after adjustments of reserve and profit on revaluation was ₹3,50,000. Shivam and Deepak paid him  ₹4,20,000 in settlement of his claim. To settle his account, a computer of ₹4,20,000 was given to Kapil. Pass the necessary Journal entries in the books of the firm.

 

Answer:

 

Working notes:

Shivam and Deepak Pay in 3:2

Shivam  = 70,000 × 3/5= 42,000

Deepak = 70,000 × 2/5= 28,000

 

Question 23:

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. Goodwill has been valued at ₹ 1,50,000. On Y's retirement, X and Z agree to share profits equally.

Pass the necessary Journal entry for treatment of Y's share of goodwill.

 

Answer:

 

Working Yotes:

 

WY1:Calculation of Gaining Ratio

X :Y :Z=3:2:1(Old ratio)

X :Z =1:1(Yew ratio)

Gaining Ratio = Yew Ratio - Old Ratio

X's Gain =1/2−3/6=3−3/6=0

Z's Gain=1/2−1/6=3−1/6=2/6

WY2: Calculation of Retiring Partner’s Share of Goodwill

Y's share of goodwill=1,50,000×2/6=₹ 50,000

Y's share of goodwill will be brought by Z only.

Therefore, Z's Capital A/c will be debited with ₹ 50,000

 

 

Question 24:

A, B, C and D are partners in a firm sharing profits, in the ratio of 2 : 1 : 2 : 1. On the retirement of C, Goodwill was valued ₹ 1,80,000. A, B and D decide to share future profits equally. Pass the necessary Journal entry for the treatment of goodwill.

 

Answer:

 

Working Notes:

WN1:Calculation of Gaining Ratio

A :B :C :D=2:1:2:1(Old ratio)

A :B 😀 =1:1:1(New ratio)

Gaining Ratio = New Ratio - Old Ratio

A's Gain =1/3−2/6=2−2/6=0

B's Gain =1/3−1/6=2−1/6=1/6

D's Gain =1/3−1/6=2−1/6=1/6

A:B:D=0:1:1

WN2: Calculation of Retiring Partner’s Share of Goodwill
C's share of goodwill=1,80,000×2/6=₹ 60,000

C's share of goodwill will be brought by B and D in their gaining ratio1:1

Therefore, B's Capital A/c will be debited with 60,000×1/2=₹ 30,000

And, D's Capital A/c will be debited with 60,000×1/2=₹ 30,000

 

Question 25:

A, B and C were partners in a firm sharing profits in the ratio of 6 : 5 : 4. Their capitals were A − ₹ 1,00,000; B − ₹ 80,000 and C − ₹ 60,000 respectively. On 1st April, 2009, A retired from the firm and the new profit sharing ratio between B and C was decided as 1 : 4. On A's retirement, the goodwill of the firm was valued at ₹ 1,80,000. Showing your calculations clearly, pass the necessary Journal entry for the treatment of goodwill on A's retirement.

 

Answer:

Working Notes:

WN1:Calculation of Gaining Ratio

A :B :C=6:5:4(Old ratio)

B :C=1:4 (New ratio)

Gaining Ratio = New Ratio - Old Ratio

B's Gain =1/5−5/15=3−5/15= −2/15(Sacrifice)

C's Gain =4/5−4/15=1/2−4/15=8/15

WN2: Calculation of Retiring Partner’s Share of Goodwill

A's share of goodwill=1,80,000×6/15=₹ 72,000

B's share of goodwill=1,80,000×2/15=₹ 24,000

A's and B's share of goodwill be brought by C only.Therefore, C's Capital A/c will be debited with 72,000+24,000 = ₹ 96,000