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Question

# Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3:2:1. Goodwill is appearing in the books at a value of Rs.60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at Rs.84,000. Hanny and Sunny decide to share future profits in the ratio of 2:1. Record the necessary Journal entries.

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Solution

## Date Particulars L.F. Debit (Rs.) Credit (Rs.) Hanny’s Capital A/c Dr. 30,000 Pammy’s Capital A/c Dr. 20,000 Sunny’s Capital A/c Dr. 10,000 To Goodwill A/c 60,000 (Existing goodwill written-off in old ratio) Hanny’s Capital A/c Dr. 14,000 Sunny’s Capital A/c Dr. 14,000 To Pammy’s Capital A/c 28,000 (Pammy’s share of goodwill adjusted to Hanny’s and Sunny’s capital account in the extent of their gain) Working Notes: (i) Pammy’s share of current value of goodwill 1/3 of Rs. 84,000 = 84,000 X 1/3 = Rs. 28,000(ii) Gaining ratio = New share – Old share Hanny’s gaining share = 2/3 – 3/6 = 1/6 Sunny’s gaining ratio = 1/3 – 1/6 = 1/6 This gaining ratio of Hanny and Sunny is 1/6: 1/6 = 1: 1

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