Chapter 4 – Change In Profit Sharing Ratio Among The Existing Partners – TS Grewal 2022
Question 6
X Y and Z are sharing partners profit and losses in the ratio of 5:3:2. From 1st April, 2022, they agreed to share profits equally. The partnership deed provides that in the event of any change in the profit sharing ratio, goodwill is to be valued at two year’s purchase of the average profit of the preceding five years. The profits and losses of the preceding years ended 31st March, are:
Year | 2018 | 2019 | 2020 | 2021 | 2022 |
Profits (in ₹) | 70,000 | 75,000 | 55,000 | 35,000 | 10,000 (Loss) |
You are required to calculate goodwill and pass journal entry.