Question

Madhu and Neha were partners in a firm sharing profits and losses in the ratio of 3: 5. Their fixed capitals were Rs 4, 00,000 and Rs 6,00,000 respectively. On 1.1.2016, Tina was admitted as a new partner for `1/4` th share in the profits. Tina acquired her share of profit from Neha. Tina brought Rs 4, 00,000 as her capital which was to be kept fixed like the capitals of Madhu and Neha. Calculate the goodwill of the firm on Tina's admission and the new profit sharing ratio of Madhu, Neha and Tina. Also, pass necessary journal entry for the treatment of goodwill on Tina's admission considering that Tina did not bring her share of goodwill premium in cash

Answer 1

Journal
Date	Particulars	L.F.	Dr. Rs	Cr. Rs
	Cash A/c       Dr     To Tina’s Capital A/c (Being capital Brought by Tina in cash) Tina’s Current A/c   Dr    To Neha’s Current A/c  (Being hidden goodwill adjusted through the  Current account)		4,00,000     50,000	4,00,000     50,000

Working Note:

Calculation of Tina'sShare of Goodwill (Hidden)

Total Capital of the firm= 16,00,000 `(400000 xx 4/1)`

Net Worth= 4,00,000+6,00,000+4,00,000 =14,00,000

Hidden Goodwill= Total Capital of the firm Net Worth

=16,00,000-14,00,000

= 2,00,000

Tina's Share in Goodwill = `200000 xx 1/4 = 50000`

Calculation of New PSR:

Madhu's Share `= 3/8`

Neha's Share = `5/8 - 1/4 = 3/8`

Tina's Share `= 1/4`

New Share= 3:3:2