A and B are partners sharing profits in the ratio of 3 : 2. They admit C into the partnership with 1/4th share in future profits. The new profit sharing ratio is 5 : 4 : 3. The firm’s goodwill on C’s admission was valued at ₹1,44,000. But C could not bring any amount for goodwill in Cash. Credit will be given to the old partners in which of the following::
Answer & explanation
Correct answer: option 4
The correct answer is option 4- A Rs26,400; B Rs9,600.
Old ratio is 3:2
New ratio is 5:4:3
Sacrifice of A = 3/5 - 5/12
= (36-25)/60
= 11/60
Sacrifice of B = 2/5 - 4/12
= (24-20)/60
= 4/60
Sacrificing Ratio of A and B = 11:4
Share of C in goodwill = 3/12*144000
= 36,000
Journal Entry will be:
C's current A/c Dr 36,000
To A's Capital A/c 26400
To B's Capital A/c 9600
(Premium for goodwill not brought by C credited to sacrificing partners' capital account in their sacrificing ratio)