Question

A, B and C were partners sharing profits in the ratio of 2 : 2 : 1, decided to share future profits in 1 : 2 : 3. On this date firm had assets of ₹ 3,80,000 including cash of ₹ 20,000. The partners' capital accounts showed a balance of ₹ 3,00,000 and reserves constituted the rest. Normal rate of return is 10% and goodwill of the firm is valued at ₹ 75,000 at 3 years' purchase of super profits.

On the basis of the above information, answer the following:

For adjustment of goodwill:

Options

• Dr. C by ₹ 22,500; Cr. A by ₹ 15,000; Cr. B by ₹ 7,500

• Dr. C by ₹ 22,500; Cr. A by ₹ 5,000; Cr. B by ₹ 17,500

• Cr. C by ₹ 22,500; Dr. A by ₹ 17,500; Dr. B by ₹ 5,000

• Dr. C by ₹ 22,500; Cr. A by ₹ 17,500; Cr. B by ₹ 5,000

Answer 1

Dr. C by ₹ 22,500; Cr. A by ₹ 17,500; Cr. B by ₹ 5,000

Explanation:

Old Ratio of A, B and C = 2 : 2 : 1

New Ratio of A, B and C = 1 : 2 : 3

Sacrifice or Gain:

`A = 2/5 - 1/6 = 7/30 "(Sacrifice)"      75,000 xx 7/30 = 17,500 (Cr.)`

`B = 2/5 - 2/6 = 2/30 "(Sacrifice)"      75,000 xx 2/30 = 5,000 (Cr.)`

`C = 1/5 - 3/6 = 9/30 "(Gain)"            75,000 xx 9/30 = 22,500`