Question

Rajesh and Mukesh are equal partners in a firm. They admit Han into partnership and the new profit sharing ratio between Rajesh, Mukesh and Han is 4:3:2. On Han’s admission goodwill of the firm is valued at Rs. 36,000. Han is unable to bring his share goodwill premium in cash. Rajesh, Mukesh and Han decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Han’s adtnission.

Answer 1

Working notes :

1. Goodwill of a firm = 36,000 Hari’s share in goodwill

= Goodwill of firm × admitting Partner Share 36,000 × \(\frac{2}{9}\)

2. Sacrificing Ratio = Old Ratio – New Ratio

Sacrificing Ratio between Rajesh and Mukesh 1:3.