Partnership

Admission

Medium

A, B and C were partner's in a firm sharing profit and losses in the Ratio of 5 : 3 : 2. They admitted D into partnership for 1/5 share of profit which he takes equally from A and B. D brought sufficient amount of goodwill in cash Capital brought in by is Rs. 50,000. On the date of admission the Balance Sheet of A, B and C was as follows :

Balance Sheet as on 31st March, 2021

Liability	Rs.	Assets	Rs.
Capital		Building and Furniture	1,50,000
A 1,00,000		Debtors 55,000
B 60,000		Provision 5,000	50,000
C 40,000	2,00,000	Cash	20,000
Creditors	50,000	Profit and Loss (2020-21)	30,000
	2,50,000		2,50,000

Goodwill is to be valued at 3 years purchase of average profit of last 4 years which were Rs. 60,000 (2017-18), Rs. 60,000 (18-19), Rs. 30,000 (19-20). On revaluation it was found that all debtors are good.

What would be the effect of the line "All Debtors are good.

Provision for Doubtful debt is Debited to old partner Capital A/c

Provision for Doubtful Debt is Debited to Revaluation Account

Provision for Doubtful Debt is Credited to old partner's Capital A/c

Provision for Doubtful Debt is Credited to Revaluation Account

✅ Correct Option: 4

Since all debtors are good, the existing Provision for Doubtful Debts is no longer needed and is written back. Entry: Provision for Doubtful Debts A/c Dr. To Revaluation A/c. Thus Revaluation A/c is credited (gain), which matches option 4.

Question 41

From the above calculate amount of Goodwill :

Question 42

Calculate the total amount brought in by new partner D including Goodwill share :

Question 43

What would be the new Profit Sharing Ratio :

Question 45

Goodwill brought in by new partners would be _________.

What would be the effect of the line "All Debtors are good.

Solution

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