Question

$A$ and $B$ are partners sharing profit and losses in the ratio of $3:2$. They admit $C$ into the firm for $1/4^{th}$ share in profits which he takes $1/6^{th}$ from $A$ and $1/{12}^{th}$ from $B$. $C$ brings in only $60\%$ of his share of firm's goodwill. Goodwill of the firm has been valued at $Rs.1,00,000$. Pass necessary Journal entries to record this arrangement.

Answer 1

JOURNAL

1. Cash a/c... Dr. 15000

To Premium for goodwill a/c 15000

(Being 60% of premium for goodwill brought in by C)

2. Premium for goodwill a/c... Dr. 15000

C's Capital a/c.... Dr. 10000

To A's Capital a/c 16667

To B's Capital a/c 8333

(Being C's share of goodwill distributed among the partners in the sacrificing ratio)

Working Note:

Calculation of sacrificing ratio:

A's sacrifice= 1/6

B's sacrifice= 1/12

Ratio= 2:1

Goodwill of the firm= 100000

C's share= 1/4 * 100000

= 25000