P, Q and R are Partners sharing Profits and losses equally. R retires and Goodwill is appearing in the books at ₹30,000. Goodwill of the firm is valued at ₹1,50,000. Calculate the net amount to be credited to R's Capital A/c for adjustment of goodwill:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹40,000.
Old ratio between P, Q & R = 1:1:1
R retires
Existing goodwill = 30,000
Existing goodwill is written off between all partners in their old ratio. The journal entry for this is as follows-
P's Capital A/c Dr. 10,000
Q's Capital A/c Dr. 10,000
R's Capital A/c Dr. 10,000
To goodwill 30,000
Goodwill of the firm = 1,50,000
R share = 1,50,000 x 1/3
= 50,000
This will be compensated by gaining partners. R will be credited for this amount.
So, net effect = credit by 50,000 and debit for 10,000
= credit by 40,000