Question

A and B are partners in a firm with Capitals of ₹ 5,00,000 and ₹ 2,00,000, respectively. They share profits in the ratio of 2 : 1. C is admitted as a partner. A and B surrender `1/2` of their respective share in favour of C. C is to bring his share of the premium for goodwill in cash. The goodwill of the firm is estimated at ₹ 60,000. B’s Capital Account will show a balance of ______.

Options

• ₹ 2,15,000

• ₹ 2,10,000

• ₹ 2,30,000

• ₹ 2,20,000

Answer 1

A and B are partners in a firm with Capitals of ₹ 5,00,000 and ₹ 2,00,000, respectively. They share profits in the ratio of 2 : 1. C is admitted as a partner. A and B surrender `1/2` of their respective share in favour of C. C is to bring his share of the premium for goodwill in cash. The goodwill of the firm is estimated at ₹ 60,000. B’s Capital Account will show a balance of ₹ 2,10,000.

Explanation:

A’s Sacrifice = `2/3 xx 1/2`

= `2/6`

B’s Sacrifice = `1/3 xx 1/2`

= `1/6`

Sacrifice Ratio of A and B = `2/6 : 1/6` or 2 : 1

C’s share of profit = `2/6 + 1/6`

= `3/6`

Firm’s Goodwill = ₹ 60,000

C brings in = `60,000 xx 3/6`

= ₹ 30,000

A’s share of goodwill = `30,000 xx 2/3`

= ₹ 20,000

B’s share of goodwill = `30,000 xx 1/3`

= ₹ 10,000

B’s Capital Balance = 2,00,000 + 10,000

= ₹ 2,10,000