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Question

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 the Goodwill was valued at Rs,72,000. A, B and D decided to share future profits equally. The necessary journal entry without opening goodwill account will be:

A
A's cap. A/c Dr. Rs.8,000
B's cap. A/c Dr. Rs.8,000
D's cap. A/c Dr. Rs.8,000
To C's cap. A/c Rs.24,000
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B
A's cap. A/c Dr. 12,000
B's cap. A/c Dr. Rs.12,000
To C's cap. A/c Rs.12,000
To D's cap. A/c Rs.12,000
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C
B's cap. A/c Dr. 12,000
D's cap. A/c Dr. 12,000
To C's cap. A/c 24,000
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D
B's cap. A/c Dr. 24,000
To C's cap. A/c 24,000
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Solution

The correct option is C B's cap. A/c Dr. 12,000
D's cap. A/c Dr. 12,000
To C's cap. A/c 24,000
Old profit sharing ratio ( A : B : C : D) = 2 : 1 : 2 : 1
New profit sharing ratio (A : B : D) = 1 : 1 : 1
C's share of goodwill = 72000 * (2/6) = 24000
Adjusting entry for goodwill

Partner

Old share

New share

Gain

Sacrifice

A

2/6

1/3

-

-

B

1/6

1/3

1/6

-

C

2/6

-

-

2/6

D

1/6

1/3

1/6

-

Adjusting entry:

B's Capital A/c Dr. 12000

D's Capital A/c Dr. 12000

To C's capital A/c 24000


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