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Question
Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4:3:2. On Hari’s admission goodwill of the firm is valued at Rs 36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari’s admission.
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Solution
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Books of Rajesh, Mukesh and Hari Journal |
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Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
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Hari’s Capital A/c |
Dr. |
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8,000 |
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To Rajesh’s Capital A/c |
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2,000 |
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To Mukesh’s Capital A/c |
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6,000 |
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(Adjustment of Hari’s share of goodwill) |
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Working Notes:
1) Goodwill of a firm = 36,000
Hari’s share in goodwill
= Goodwill of firm × admitting Partner Share
= 36,000 x `2/9` = 8,000
2) Sacrificing Ratio = Old Ratio − New Ratio
Rajesh's = `1/2 - 4/9 = [ 9 - 8]/18 = 1/18`
Mukes's = `1/2 - 3/9 = [ 9 - 6]/18 = 3/18`
Sacrificing Ratio between Rajesh and Mukesh 1:3.
