DK Goel Solutions Vol 1 Chapter 3 Admission of a partner

DK Goel Accountancy Class 12 Solutions Chapter 3 Admission of a Partner are created by expert Accountancy teachers from the latest version of DK Goel Class 12 Accountancy books. We at coolgyan’S provide DK Goel Solutions to assist students in developing a comprehensive understanding of all the theories. There are numerous concepts in Accountancy. However, the concepts of Admission of a partner, Accounting Ratios and Cash Flow Statement (As per AS – 3 Revised) is essential.

DK Goel Solutions Class 12 – Chapter 3 – Part A
Question 1

A and B are partners sharing profits in the ratio of 3:2. They admit C into the company for 1/4th share in profit which he takes 1/6th from A and 1/12th from B. However, C brings ₹50,000 as goodwill out of his share of ₹90,000. No goodwill account appears in the books of the company. Pass necessary journal entries to record this arrangement.

Solution:

Journal
Date Particulars L.F Dr. (₹) Cr. (₹)
Bank Account Dr. 50,000
To Premium for Goodwill A/c 
(A part of his share of goodwill/premium brought in by C)
50,000
Premium for Goodwill A/c 
C’s Current A/c
Dr. 
Dr.
50,000 
40,000
To A’s Capital A/c 60,000
To B’s Capital A/c 
(Goodwill/premium credited to A and B in their sacrificing ratio, i.e, 2:1)
30,000

Question 2
A and B are partners sharing profits equally. They admit C into partnership, C paying only ₹60,000 for premium out of his share of a premium of ₹1,80,000 for a 1/4th share of profit. Goodwill account appears in the book at ₹3,00,000. Give the necessary journal entries.
Solution:

Journal Entry
Date Particulars L.F Dr. (₹) Cr. (₹)
A’s Capital A/c Dr. 1,50,000
B’s Capital A/c Dr. 1,50,000
To Goodwill A/c 
(The existing goodwill is written off)
3,00,000
Bank A/c Dr. 60,000
To Premium for Goodwill A/c 
(A part of his share of goodwill/premium brought in by C)
60,000
The premium for Goodwill A/c Dr. 60,000
C’s Current A/c Dr. 48,000
To A’s Capital A/c 54,000
To B’s Capital A/c 
(The goodwill/premium credited to old partners in their sacrificing ratio i.e 1:1)
54,000

Question 3
X and Y are partners in a company. Their profit sharing ratio is 5:3. They admit Z into a partnership for 1/4th share. As between themselves, A and B decide to share profits equally in the future. C brings in ₹1,20,000 as his capital and ₹60,000 as premium. Calculate the sacrificing ratio and record the necessary journal entries on the assumption that the amount of premium brought in by C is retained in the business.
Solution:

Journal
Date Particulars L.F Dr. (₹) Cr. (₹)
Bank A/c Dr. 1,80,000
To Z’s Capital A/c 1,20,000
To Premium for Goodwill A/c 
(The amount of goodwill/premium brought in cash)
60,000
The premium for Goodwill A/c Dr. 60,000
To X’s Capital A/c 
(Full amount of goodwill /premium transferred to X’s Capital A/c, as he alone has sacrificed
60,000

Calculation of new profit sharing ratio: C takes a 1/4th share out of 1.
Thus, the remaining profit is 3/4; This is divided equally between A and B
X’s new share = 3/4 x 1/2 = 3/8
Y’s new share = 3/4 x 1/2 = 3/8
Sacrificed made by X = 5/8 – 3/8 =2/8
Sacrificed made by Y = 3/8 – 3/8 =0
Hence, X alone has sacrificed and as such he alone will be entitled to the full amount of goodwill premium brought in by Z.
Question 4
Balance Sheet of P and Q who share profits and losses in the ratio of 5:3 as at 31st March, 2018 was a follows.

Liabilities Assets
Capital Accounts: Land & Building 3,00,000

Q
Profit & Loss A/c
Workmen Compensation Reserve
Sundry Creditors
2,50,000 
1,50,000
1,30,000
60,000
50,000
Machinery 
Stock
Debtors
Cash
Advertisement Expenditure
(Deferred Revenue)
2,00,000 
70,000
30,000
10,000
30,000
6,40,000 6,40,000

They admit R as a partner for 1/3 rd share in the profits of the firm which he acquires from P and Q in the ratio of 3:1. R brings in ₹4,00,000 as his capital. Ascertain the amount of goodwill and pass journal entries on the admission of R.
Solution:

Journal
Date Particulars L.F Dr. (₹) Cr. (₹)
2018 
1st April
Profit and Loss A/c 
Workmen Compensation Reserve A/c
Dr. 
Dr.
1,30,000 
60,000
To P’s Capital A/c 
To Q’s Capital A/c
(Transfer of accumulated profits to old partners in their old profit sharing ratio)
1,18,750 
71,250
P’s Capital A/c 
Q’s Capital A/c
Dr. 
Dr.
18,750 
11,250
To Advertisement Expenditure A/c 
(Transfer of accumulated loss to old partners in their old profit sharing ratio)
30,000
Bank A/c Dr. 4,00,000
To R’s Capital A/c 
(Amount brought in by R as his capital)
4,00,000
R’s Current A/c Dr. 80,000
To P’s Capital A/c 
To Q’s Capital A/c
(R’s share of goodwill credited to P and Q in their sacrificing ratio 3:1)
60,000 
20,000

Working Note:
Calculation of hidden goodwill

Total of Capital of the new firm on the basis of R’s capital: ₹4,00,000 x 3/1 12,00,000
Less: Net worth of new firm:
Adjusted capital of P
(₹2,50,000 + ₹1,18,750 – ₹18,750) 3,50,000
Adjusted capital of Q
(₹1,50,000 + ₹71,250 – ₹11,250) 2,10,000
Capital of R 4,00,000 9,60,000
Value of the firm’s goodwill 2,40,000
R’s share of goodwill = ₹2,40,000 x 1/3 = ₹ 80,000

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