Question

Mohan and Sohan were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted Ram for 1/4th share on 1st April, 2018. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profit of last 4 years which were Rs. 50,000 for 2014-15, Rs. 60,000 for 2015-16, Rs. 90,000 for 2016-17 and Rs. 70,000 for 2017-18. Ram did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram’s admission when: 

(a) Goodwill appears in the books at Rs. 2,02,500. 

(b) Goodwill appears in the books at Rs. 2,500. 

(c) Goodwill appears in the books at Rs. 2,02,000.

Answer 1

Note: since no information is given about the of sacrifice, it is assumed that old partner are sacrificing in their old profit sharing ratio.