Read the following passage and answer the question.
In a partnership firm, A B, and C are partners sharing profits and losses in the ratio of 3:2:1. Their capitals were of ₹1,00,000, ₹2,00,000 and ₹50,000 respectively. On August 2nd, 2021, B died. A and C decided to give the share of B to his executive on 5th August. Sales and profits for the previous year were ₹5,00,000 and ₹3,00,000 respectively, whereas the sale of the firm till the date of B's death was ₹3,00,000. Goodwill of the firm was revalued at ₹2,40,000. The firm follows the financial accounting year.
Journal Entry entry for B's share of premium for Goodwill would be -
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
A's capital A/c Dr. ₹60,000
C's capital A/c Dr. ₹20,000
To B's Capital A/c ₹80,000
(Premium for goodwill recorded)
Goodwill of the firm = ₹2,40,000
Share of B in Goodwill = 2,40,000 x 2/6
= 80,000
Gained share = New share - Old share
A = 3/4 - 3/6
= 3/12
C = 1/4 - 1/6
= 1/12
Gaining ratio = 3:1
A will give = 80,000 x 3/4
= 60,000
C will give = 80,000 x 1/4
= 20,000
So, the following entry is passed for this-
A's capital A/c Dr. ₹60,000
C's capital A/c Dr. ₹20,000
To B's Capital A/c ₹80,000
(Premium for goodwill recorded)