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Hemant and Nishant Were Partners in the Firm Sharing Profits in the Ratio of 3:2 Calculate the Value of Goodwill of the Firm and Record Necessary Journal Entries for the Above Transactions on Somesh'S Admission. - CBSE (Arts) Class 12 - Accountancy

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Question

Hemant and Nishant were partners in the firm sharing profits in the ratio of 3:2. Their capitals were Rs 1,60,000 and Rs 1,00,000 respectively. They admitted Somesh on 1st April 2013 as a new partner for 1/5 share in the future profits. Somesh brought Rs 1,20,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Somesh's admission.

Solution

Journal Entry
Date Particulars L.F.

Debit

Rs

Credit

Rs

 

Cash A/c           Dr.

    To Somesh’s Capital A/c

(Being Somesh brought his share capital)

 

1,20,000

 

 

 

1,20,000

 

 

Somesh’s Capital A/c      Dr.

     To Hemant’s Capital A/c

     To Naresh’s Capital A/c

(Being the share of goodwill brought in by Somesh, distributed among sacrificing partners in sacrificing ratio 3:2)

 

44,000

 

 

 

 

26,400

17,600

 

 

Calculation of Profit sharing Ratio:

Hemant: Naresh

Old Ratio = 3:2

Somesh Share = `1/5`

Let the total share of the firm =1

Remaining share of the firm = `1 - 1/5 = 4/5`

Hemant 's New Share = `3/5 xx 4/5  = 12/25`

Naresh's New Share  = `2/5 xx 4/5 = 8/25`

New profit Sharing Ratio = ` 12/25: 8/25: 1/5`

`(12:8: 5)/25`

Sacrificing Ratio = old Ratio - New Ratio

Hemant's Sacrifice = `3/5 - 12/25 = 3/25`

Naresh's Sacrifice = `2/5 - 8/25 = 2/25`

Sacrificing Ratio= 3 : 2

Calculation of Somesh's share of Goodwill:

Total Capitalised Value of Firm = Capital brought in by Somesh x Reciprocal of his share

Total Capitalised Value of Firm = `120000 xx 5/1 = 600000`

Net Worth = Capital of Hemant +Capital of Naresh + Capital of Somesh

Net Worth = 1,60,000 + 1,00,000 + 1,20,000 = Rs 3,80,000

Goodwill of the Firm = Total Capitalised Value of the Firm – Net Worth

Goodwill of the Finn = 6,00,000 – 3,80,000 =Rs 2,20,000'

Somesh's share of Goodwill = `220000xx1/5 = 44000`

Hemant will get = `44000 xx 3/5 = 26400`

Naresh will get = `44000 xx 2/5 = 17600`

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Solution Hemant and Nishant Were Partners in the Firm Sharing Profits in the Ratio of 3:2 Calculate the Value of Goodwill of the Firm and Record Necessary Journal Entries for the Above Transactions on Somesh'S Admission. Concept: Concept of Goodwill.
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