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Standard XII

Accountancy

Accounting for Goodwill

A admitted as...

Question

A admitted as a new partner for 1/ 4 share of future profits, fails to bring in cash of Rs. 5,000 towards goodwill but the existing (old) partners B and C sharing profits in the ratio of 3 : 2 raise goodwill account at its full value. Therefore, partners will be credited for goodwill as:

B = Rs. 3,000, C = Rs. 2,000, A = Nil

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B = Rs. 9,000, C = Rs. 6,000, A = Rs. 5,000

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B = Rs. 12,000, C = Rs. 8,000, A = Nil

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B = Rs. 2,250, C = Rs. 1,500, A = Rs. 1,250

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Solution

The correct option is B B = Rs. 12,000, C = Rs. 8,000, A = Nil
Old ratio (B and C) = 3 : 2
A is admitted for 1/4 share of profit for which he was supposed to bring goodwill of Rs. 5000
According to A's share total goodwill of the firm is A's share to goodwill multiply by reciprocal of A's share of profit
Therefore, total goodwill = Rs. 5000 * (4/1) = Rs. 20000
Goodwill credited to old partner in old ratio is-
B = Rs. 20000 * (3/5) = Rs. 12000
C = Rs. 20000 * (2/5) = Rs. 8000

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Similar questions

A

and

B

are partners sharing profits in the ratio of

3 : 2

. Their books show goodwill at

R s . 2, 000

C

is admitted with

1 / 4^{t h}

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R s . 10, 000

as his capital but is not able to bring in cash for his share of goodwill

R s . 3, 000

. Draft Journal entries.

A

and

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are partners in a business sharing profits and losses in the ratio of

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and

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1^{s t}

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respectively. On that date, they admit

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George and Henry are partners sharing profits in the ratio of 3 : 2. They decided to admit David as a new partner and to share future profits and losses equally.

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