Question

$X$ and $Y$ are partners in a firm sharing profits in the ratio of $3:2$. On $1^{st}$April, 2018, they admit $Z$ as a new partner for $1/4^{th}$ share in the profits. $Z$ contributes following assets towards his capital and for his share of goodwill:
Stock $Rs.60,000$, Debtors $Rs.80,000$, Land $Rs.1,00,000$, Plant and machinery $Rs.40,000$. On the date of admission of $Z$, the goodwill of the firm was valued at $Rs.6,00,000$.
Pass necessary Journal entries in the books of the firm on $Z^{\prime }s$ admission.

Answer 1

JOURNAL

1. Stock a/c.... Dr. 60000

Debtors a/c... Dr. 80000

Land a/c.... Dr. 100000

Plant and machinery a/c... Dr. 40000

To Z's Capital a/c 130000

To Premium for goodwill a/c 150000

(Being capital and premium for goodwill brought in by C in the form of assets)

2. Premium for Goodwill a/c.... Dr. 150000

To X's Capital a/c 90000

To Y's Capital a/c 60000

(Being premium for goodwill distributed among partners in the ratio of 3:2)

Working Note:

1. Calculation of Z's share of goodwill:

Z's share of Goodwill= 600000 * 1/4= 150000

Z's share of capital = 280000 - 150000 = 130000

2. Distribution of premium for goodwill:

X's share= 3/5 * 150000= 90000

Y's share= 2/5 * 150000= 60000