Question : X and Y are partners with a capital of Rs 5,000 each. They admitted Z as partners with 1/4 share in the profit of the firm. Z brings Rs 8,000 as his share of capital. The profit and loss a/c showed a credit balance e of Rs 4,000 as of the date of admission of Z. Journal entry to record goodwill will be.
Option 1: Z's capital A/c Dr 2500
To X's capital account 1250
To Y's capital account 1250
Option 2: Z's capital account Dr 5000
To X's capital account 2500
To Y's capital account Rs 2500
Option 3: Z's capital account Dr 10,000
To X's capital account 5000
To Y's capital Account 5000
Option 4: None of the above
Correct Answer:
Z's capital A/c Dr 2500
To X's capital account 1250
To Y's capital account 1250
Solution :
Answer =
Z's capital A/c Dr 2500
To X's capital account 1250
To Y's capital account 1250
Let the total capital of the new firm be 1
Z's share is 1/4 then his capital is 8000
The total capital of the new firm will be 8000×4=32,000
The total capital of X and Y and Z is 5000+5000+8000+4000=22,000
The goodwill of the firm is 32,000-22,000=10,000
Z's share 10,000 / 4=2500
If the new partner is unable to bring his share goodwill adjusted through his capital account the entry will be
Z's capital account Dr 5000
To X's capital Account 1250
To Y's capital account 1250
Hence, the correct option is 1.
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