Capital Balances of X, Y and Z sharing profits and losses in proportion to their capitals stood as follows:
Capital Balances of X, Y and Z sharing profits and losses in proportion to their capitals stood as follows:
X – ₹ 10,00,000, Y – ₹ 15,00,000, Z – ₹ 10,00,000.
X retired from the firm, Y and Z will share future profits equally. Goodwill of the firm is valued at ₹ 7,00,000 and Goodwill Account is not raised. Which of the following is correct?
a) Credit Partners’ Capital Accounts with old profit sharing ratio for ₹ 7,00,000
b) Credit Partners’ Capital Accounts with new profit sharing ratio for ₹ 7,00,000
c) Credit X’s Capital Account with ₹ 2,00,000 and debit Y’s Capital Account with ₹ 50,000 and Z’s Capital Account with ₹ 1,50,000.
d) Credit Partners’ Capital Accounts with gaining ratio for ₹ 7,00,000.
Anurag Pathak Changed status to publish July 3, 2023
Ans – c)
Solution:-
Old ratio of X, Y and Z = 10,00,000 : 15,00,000 : 10,00,000
2 : 3 : 2
X retired
New ratio of Y and Z = 1 : 1
Calculation of Gaining Ratio
Y = 1/2 – 3/7 = 7 – 6/14 = 1/14
Z = 1/2 – 2/7 = 7 – 4/14 = 3/14
Gaining Ratio Y and Z = 1 : 3
X’s share in Goodwill = 7,00,000 × 2/7 = ₹ 2,00,000 (Cr.)
Y will compensate = 2,00,000 ×1/4 = ₹ 50,000 (Dr.)
Z will compensate = 2,00,000 × 3/4 = ₹ 1,50,000 (Dr.)
Journal Entry of Goodwill
Y’s Capital A/c Dr. ₹ 50,000
Z’s Capital A/c Dr. ₹ 1,50,000
To X’s Capital A/c ₹ 2,00,000
Anurag Pathak Changed status to publish July 3, 2023
