Question : A and B are partners sharing profits and losses in the ratio of 3: 2. They admit C into partnership for 1/4th share, which he takes 1/6th from A and 1/12th from B. Goodwill exists in the books at Rs. 20,000. C brings Rs. 18,000 as goodwill out of his share of Rs. 30,000. It was decided that the shortfall in amount shall be debited to C's Current Account. Choose the correct journal entry.
Option 1: Debiting A and B 's capital account with Rs 12,000 and Rs 8000 and Crediting goodwill account with Rs 20,000
Option 2: Debiting premium for Goodwill account Rs 18,000 and debiting C's current account with Rs 12,000 and crediting A with Rs 20,000 and B with Rs 10,000
Option 3: Both 1 and 2
Option 4: None of the above
Correct Answer: Both 1 and 2
Solution : Answer = Both 1 and 2
A's Capital A/c Dr 12000
B's Capital A/c Dr 8000
To Goodwill - 20,000
(old ratio - 3:2)
Cash A/c Dr 18000
To Premium For Goodwill 18000
Premium for Goodwill A/c Dr 18000
C's Current A/c Dr 12000
To A's Capital A/c - 20,000
To B's Capital A/c - 10,000
(S. Ratio = 2:1)
Hence, the correct option is 3.
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