question_answer

X, Y and Z were partners in a firm sharing profits in 3 : 2 : 1 ratio. The firm closes its books on 31st March every year. Y died on 12th June, 2017. On Y's death, the goodwill of the firm was valued at Rs. 60,000. His share in the profits of the firm till the time of his death was to be calculated on the basis of previous year's profit which was Rs. 1,50,000. According to Y's will, the executors should donate his share to an orphanage for girls. Pass necessary journal entries for the treatment of goodwill and Y's share of profit at the time of his death. Also, identify the value being highlighted in the question.

Answer:

                                                                        JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
	X's Capital A/c	Dr		15,000
	Z's Capital A/c	Dr		5,000
	To Y's Capital A/c				20,000
	(Being the goodwill adjusted)
	Profit and Loss Suspense A/c	Dr		10,000
	To Y's Capital A/c				10,000
	(Being Y's share of profit till the date of death transferred to his capital account)
	Y's Capital A/c	Dr		30,000
	To Y's Executors A/c				30,000
	(Being amount due to Y transferred to his executor's account)

Working Notes 1. Gaining Ratio = New Share - Old Share             X \[=\frac{3}{4}-\frac{3}{6}=\frac{9-6}{12}=\frac{3}{12};\]                 Z \[=\frac{1}{4}-\frac{1}{6}=\frac{3-2}{12}=\frac{1}{12}\] Gaining Ratio = 3 : 1 2. Calculation of Goodwill \[60,000\times \frac{2}{6}\]= Rs. 20,000; to be shared by X and Z in their gaining ratio i.e 3 : 1 X will Share \[=20,000\times \frac{3}{4}=Rs.\,15,000\] Z will Share \[=20,000\times \frac{1}{4}=Rs.\,5,000\] 3. Calculation of Y's Share in Profit \[1,50,000\times \frac{2}{6}\times \frac{73}{365}=Rs.\,10,000\] Value being shown is women empowerment and empathy.