Read the following passage and answer the question.
X, Y, Z were partners sharing profits and losses in the ratio of 1:2:3. Z retired and his capital after making all adjustments is ₹2,20,000. X & Y agreed to pay him ₹2,50,000 in full settlement of his claim. The new profit-sharing ratio is 1:3.
Pass the journal entry for the adjustment of goodwill.
Answer & explanation
Correct answer: option 4
The correct answer is option 4-
X's Capital A/c Dr. ₹5,000
Y's Capital A/c Dr. ₹25,000
To Z's Capital A/c ₹30,000
Goodwill is distributed in gaining ratio means 1:5.
So X and Y will contribute in this ratio to Z.
So, the journal entry will be:
X's Capital A/c Dr. ₹5,000
Y's Capital A/c Dr. ₹25,000
To Z's Capital A/c ₹30,000