28 :- X and Y are partners sharing profits in the ratio of 5:3. Z is admitted as a partner for 3/10th share of profit, half of which was gifted by X and remaining share was taken by Z equally from X and Y. The goodwill of the firm is valued at Rs 54,000. Z brings in his requisite share of firm’s goodwill. The profit for the first year of new partnership amounts to Rs 60,000.
Pass the necessary journal entries to adjust goodwill and to distribute profits.
Solution :-
WORKING NOTES :-
(a) Calculation of new profit sharing ratio
Old Profit sharing ratio of X and Y is 5 : 3
Z is admitted for 3/10th of profit Share.
Z receives from X = 3/10 x 1/2 + 3/20 x 1/2 = 3/20 + 3/40 = 9/40
Z receives from Y = 3/20 x 1/2 = 3/40
X’s New Share = 5/8 – 9/40 = 16/40
Y’s New Share = 3/8 – 3/40 = 12/40
New Profit Sharing Ratio of X, Y and Z is 4 : 3 : 3.
(b) Calculation of Sacrificing Ratio of X and Y
Z is admitted for 3/10th share.
Z receives half of his share as gift from X I.e, 3/10 x 1/2 = 3/20
Remaining share of Z = 3/10 – 3/20 = 3/20 is surrendered equally.
X surrendered = 3/20 x 1/2 = 3/40
Y surrendered = 3/20 x 1/2 = 3/40
Sacrificing ratio of X and Y is 1 : 1
(c) Calculation of Partner’s share of Goodwill
Z is admitted for 3/10th share but he Receives 3/20th of his share as gift from X.
Goodwill of the firm = Rs 54,000
Z’s premium for goodwill = 54,000 x 3/20 = Rs 8,100
It would be credited in X and Y’s Capital Accounts in 1 : 1
X = 8,100 x 1/2 = Rs 4,050
Y = 8,100 x 1/2 = Rs 4,050.