X and Y are partners in a firm sharing profits in the ratio of 5 : 3. They admitted Z as a new partner. The new profit sharing ratio will be 4 : 3 : 2. The firm's goodwill on Z's admission was valued at Rs1,26,000. But Z could not bring any amount of goodwill in Cash. Credit will be given to which partner?
Answer & explanation
Correct answer: option 3
Old ratio is 5:3
New ratio is 4:3:2
Sacrifice of A = 5/8 - 4/9
= (45-32)/72
= 13/72
Sacrifice of B = 3/8 - 3/9
= (27-24)72
= 3/72
Sacrificing Ratio= 13:3
Share of goodwill of Z= 2/9*1,26,000=28,000
Journal Entry will be:
Z's current A/c Dr 28,000
To X's Capital A/c 22750
To Y's Capital A/c 5250
(Premium for goodwill not brought by C credited to sacrificing partners' capital account in their sacrificing ratio)