21 :- M, N and O are partners in a firm sharing profits in the ratio of 3:2:1. Goodwill has been valued at Rs 60,000. On N’s retirement, M and O agree to share profits equally. Pass the necessary journal entry for treatment of N’s share of goodwill.
Solution :-
WORKING NOTES :-
(a) Calculation of gaining ratio
New ratio – old ratio
M = 1/2 – 3/6 = 0 (no change)
O = 1/2 – 1/6 = 2/6 (gain)
Only O gains
(b) Calculation of share of goodwill
N’s share = 60,000 x 2/6 = Rs 20,000
O’s share = 60,000 x 2/6 = Rs 20,000