K, N and P are partners sharing profits and losses in the ratio of 4:3:2. N retires and the goodwill is valued at ₹72,000. K and P decided to share future profits and losses in the ratio of 5:3. Find which of the following is not correct?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- N Capital A/c is debited with ₹24,000.
K, N and P old ratio = 4:3:2
N retires
Goodwill = ₹72,000.
K and P new ratio = 5:3
Gaining share = New share - Old share
Gain of K = 5/8 - 4/9
= (45-32)/72
= 13/72
Gain of P = 3/8 - 2/9
= (27-16)/72
= 11/72
Gaining ratio = 13/72 : 11/72 or 13:11
Goodwill share of N will be distributed in this ratio.
So, N's share in goodwill = 72,000 x 3/9
= 24,000
K will compensate to N = 24,000 x 13/24
= 13,000
P will compensate to N = 24,000 x 11/24
= 11,000
Journal entry for this-
K's Capital A/c 13,000
P's Capital A/c 11,000
To N's Capital A/c 24,000
So, option 2 is not correct as N's Capital A/c is credited not debited.