Check sibling questions

Suresh, Ramesh and Tushar were partners of a firm sharing profits in the ratio of 6:5:4. Ramesh retired and his capital after making adjustments on account of reserves, revaluation of assets and reassessment of liabilities stood at ₹ 2,50,400. Suresh and Tushar agreed to pay him ₹ 2,90,000 in full settlement of his claim. Pass necessary journal entry for the treatment of goodwill. Show workings clearly.

 

Answer

Calculation of hidden Goodwill
Total Amount agreed to be paid to Suresh = 290000
Ramesh's Adjusted Capital = 250400
Ramesh's share of Goodwill (Hidden Goodwill) = 39600

 

Goodwill will be shared in gaining ratio which is 3:2

Date Particulars L.F Dr (Amount) Cr (Amount)  
  Suresh's Capital A/c  Dr   23760   (39600*3/5)
  Tushar's Capital A/c  Dr   15840   (39600*2/5)
                   To Ramesh's Capital A/c     39600  
  (Ramesh's share of Goodwill adjusted in Gaining Ratio)        

 

Working Notes :-

Calculation of Gaining Ratio :-

Gaining Ratio = New profit Share - Old profit Share

 

Old Ratio = 6 : 5 : 4

New Ratio = 6 : 4

Suresh's Gain = 3/5 - 6/15 = 3/15

Tushar's Gain = 2/5 - 4/15 = 2/15

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Transcript

Suresh, Ramesh and Tushar were partners of a firm sharing profits in the ratio of 6:5:4. Ramesh retired and his capital after making adjustments on account of reserves, revaluation of assets and reassessment of liabilities stood at ₹ 2,50,400. Suresh and Tushar agreed to pay him ₹ 2,90,000 in full settlement of his claim. Pass necessary journal entry for the treatment of goodwill. Show workings clearly. Answer Calculation of hidden Goodwill Total Amount agreed to be paid to Suresh = 290000 Ramesh's Adjusted Capital = 250400 Ramesh's share of Goodwill(Hidden Goodwill) = 39600 Goodwill will be shared in gaining ratio which is 3:2 Date Particulars L.F Dr (Amount) Cr (Amount) Suresh's Capital A/c Dr 23760 (39600*3/5) Tushar's Capital A/c Dr 15840 (39600*2/5) To Ramesh's Capital A/c 39600 (Ramesh's share of Goodwill adjusted in Gaining Ratio) Working Notes :- Calculation of Gaining Ratio :- Gaining Ratio = New profit Share - Old profit Share Old Ratio = 6 : 5 : 4 New Ratio = 6 : 4 Suresh's Gain = 3/5 - 6/15 = 3/15 Tushar's Gain = 2/5 - 4/15 = 2/15

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Davneet Singh

Davneet Singh is a graduate from Indian Institute of Technology, Kanpur. He has been teaching from the past 12 years. He provides courses for Maths and Science at Teachoo.