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X,Y, and Z were partner sharing profit in proportion to 5:3:2. Good will does not appear in the books, but it is agreed to be worth Rs. 1,00,000. X retires from the firm and Y and Z decide to share future profits equally. You are required to make adjustment entry for good will without opening good will account at all. Show your working clearly. |
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Answer» X’s share of goodwill adjusted through capital accounts in the gaining ratio. Old ratio = 5:3:2 New ratio =1:1 Gaining ratio = New ratio – Old ratio Gain of Y = 1/2 – 3/10 = 2/10 Gain of Z= 1/2 – 2/10 = 3/10 Gaining ratio of Y and Z = 2 : 3 Value of goodwill of the firm = 1,00,000 X’s s hare of goodwill = 1,00,000 × 5/10 = 50,000 Journal Entry:
[X’s share of goodwill adjusted through the capital accounts of remaining partners in the gaining ratio of 2:3]. |
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