question_answer

Ajay, Pranav and Vijay are in partnership sharing profits in the ratio of 4 : 3 : 1. Pranav died on 30th June, 2017. The firm's profits for various years were: 2012 (profits Rs. 3,24,444),2013 (profits Rs. 80,000), 2014 (profits Rs. 10,000), 2015 (losses Rs. 10,000), 2016 (profits Rs. 40,000) and 2017 (profits Rs. 50,000). Ajay and Vijay decided to share future profits in the ratio of 3 : 2. Goodwill is to be valued on the basis of 2 years' purchase of average profit of 4 completed years immediately preceding the year of death of a partner. Pass the journal entry to record Pranav's share of goodwill.

Answer:

                                                                                    JOURNAL            

Date	Particular		LF	Amt (Dr)	Amt (Cr)
2017 June 30	Ajay?s Capital A/c	Dr		6,000
	Vijay?s Capital A/c	Dr		16,500
	To Pranav?s Capital A/c				22,500
	(Being the Pranav?s share of goodwill credited to Pranav and debited to Ajay and Vijay in their gaining ratio of 4 : 11)

            Working Notes             Gaining Ratio = New Share ? Old Share 1. Ajay?s Gain\[\,=\,\frac{3}{5}-\frac{4}{8}=\frac{24-20}{40}=\frac{4}{40}'\]     Vijay?s Gain \[=\,\frac{2}{5}-\frac{1}{8}=\frac{16-5}{40}=\frac{11}{40}\] Gaining Ratio of Ajay and Vijay\[=\frac{4}{40}:\frac{11}{40}=4:11\] 2. Average Profit of 4 Years \[=\frac{Rs.\,80,000+Rs.\,10,000+(Rs.\,10,000)+Rs.\,40,000}{4}=30,000\] \[Firm's\,Goodwill\,=\,Rs.\,30,000\times 2=\,Rs.\,60,000\] Pranav?s Share of Goodwill \[=\,Rs.\,60,000\times 3/8=Rs.\,22,500\]