X and Y are partners in firm in3:2 they admit Z for 3/10 Share Goodwill of firm is - Accountancy -

Question

X and Y are partners in firm in3:2 they admit Z for 3/10 Share
Goodwill of firm is valued at 60000 Goodwill already appearing in
books 20000 Z brings 5,800 in cash and Machinery worth 5,000
Towards his of goodwill Z contributed following assets towards his
share of capital cash 59000 Book debt 19000 Stock 12000 Goodwill
10000 The amount of goodwill is withdrawn by them to the extent if
30% of what is credited to them Pass necessary journal entries

Nikhil Sehgal · Accepted Answer

(a)

X’s Capital
A/c
Dr

12,000

Y’s Capital
A/c
Dr

8,000

To Goodwill A/c

20,000

(Existing value of goodwill
written off)

(b)

Cash A/c
Dr

5,800

Machinery A/c
Dr

5,000

To Premium on Goodwill
A/c

10,800

(Cash and machinery brought in
by Z for his share of goodwill)

(c)

Premium on Goodwill
A/c
Dr

10,800

Z’s Capital
A/c
Dr

7,200

To X’s Capital
A/c

10,800

To Y’s Capital
A/c

7,200

(Share of incoming partner in
firms goodwill credited to sacrificing partners)

(d)

Cash A/c
Dr

59,000

Book Debts A/c
Dr

19,000

Stock A/c
Dr

12,000

Goodwill A/c
Dr

10,000

To Z’s Capital
A/c

1,00,000

(Assets brought in as
capital)

(e)

X’s Capital
A/c
Dr

3,240

Y’s Capital
A/c
Dr

2,160

To Cash A/c / Bank
A/c

5,400

(Goodwill withdrawn by
existing partners)

Working Notes:
(i) Calculation of New Ratio and Sacrificing RatioOld Profit Sharing Ratio between X and Y is 3:2Let the total share of firm be 1Incoming Partner's share = 310Remaining Share = 1-310=710New Share of X = 710×35=2150New Share of Y = 710×25=1450Share of Z=310×55=1550 Therefore, New Profit Sharing Ratio is 21:14:15Sacrifice made by X = 35-2150=950Sacrifice made by Y = 25-1450=650Sacrifcing Ratio is 3:2(ii) Calaculation of Z's share of GoodwillGoodwill of Firm: Rs 60,000Z's share= 310×60,000=18,000

(a)
X’s Capital A/c	Dr.	12,000
Y’s Capital A/c	Dr.	8,000
To Goodwill A/c			20,000
(Existing value of goodwill written off)

(b)
Cash A/c	Dr.	5,800
Machinery A/c	Dr.	5,000
To Premium on Goodwill A/c			10,800
(Cash and machinery brought in by Z for his share of goodwill)

(c)
Premium on Goodwill A/c	Dr.	10,800
Z’s Capital A/c	Dr.	7,200
To X’s Capital A/c			10,800
To Y’s Capital A/c			7,200
(Share of incoming partner in firms goodwill credited to sacrificing partners)

(d)
Cash A/c	Dr.	59,000
Book Debts A/c	Dr.	19,000
Stock A/c	Dr.	12,000
Goodwill A/c	Dr.	10,000
To Z’s Capital A/c			1,00,000
(Assets brought in as capital)

(e)
X’s Capital A/c	Dr.	3,240
Y’s Capital A/c	Dr.	2,160
To Cash A/c / Bank A/c			5,400
(Goodwill withdrawn by existing partners)