Question

Asmi, Kiwi and Tia are patners in a firm sharing profits in the ratio of 2 : 1 : 2. They admitted Mithi for `1/5`th share in profit who will bring ₹ 2,40,000 as her share of goodwill. Goodwill is adjusted by passing the following entry:

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Premium for Goodwill A/c   ...Dr.		2,40,000
	Kiwi’s Capital A/c   ...Dr.		60,000
	To Asmi’s Capital A/c			1,20,000
	To Tia’s Capital A/c			1,80,000
	(Goodwill adjusted among sacrificing and gaining partners)

Find out new profit sharing ratio after admission of Mithi.

Answer 1

Based on Mithi’s share of premium for goodwill, total goodwill of the firm = `2,40,000 xx 5/1`

= 12,00,000

Since Kiwi’s Capital A/c has been debited, it means he has also gained and his gained share = `(60,000)/(12,00,000)`

= `1/20`

Total gain of Kiwi and new partner Mithi = `1/20 + 1/5`

= `(1 xx 2)/(20 xx 2) + (1 xx 8)/(5 xx 8)`

= `2/40 + 8/40`

= `10/40`

= `1/4`

Sacrifice ratio of Asmi and Tia = 1,20,000 : 1,80,000

= 2 : 3

Sacrifice made by Asmi = `1/4 xx 2/5`

= `2/20`

Sacrifice made by Tia = `1/4 xx 3/5`

= `3/20`

New Profit share of Asmi = `2/5 - 2/20`

= `(2 xx 4)/(5 xx 4) - 2/20`

= `8/20 - 2/20`

= `(8 - 2)/20`

= `6/20`

New Profit share of Kiwi = `1/5 + 1/20`

= `(1 xx 4)/(5 xx 4) + 1/20`

= `4/20 + 1/20`

= `(4 + 1)/20`

= `5/20`

New Profit share of Tia = `2/5 - 3/20`

= `(2 xx 4)/(5 xx 4) - 3/20`

= `8/20 - 3/20`

= `(8 - 3)/20`

= `5/20`

New Profit share of Mithi = `1/5`

= `(1 xx 4)/(5 xx 4)`

= `4/20`

New Profit Sharing Ratio of Asmi, Kiwi, Tia, and Mithi = `6/20 : 5/20 : 5/20 : 4/20` or 6 : 5 : 5 : 4