A and B are partnres in the firm sharing profits in the ratio of 3:2. A and B surrender 1/2 of their respective shares in favour of C. C is to bring his share of premium for goodwilll in cash. Goodwill of the firm is valued RS 40,000.
Pass Journal entries recording goodwill in the above case.

Explanation

Notes:
1. A's sacrifice `3//5xx1//2=3//10`, B's sacrifice `=2//5xx1//2=1//10`. Sacrificing Ratio between A and B =3:2.
2. C's Share `=(3)/(10)+(2)/(10)=(5)/(10)or(1)/(2)`.
3. Goodwill brought by C = 1//2 of RS 40,000, i.e., RS 20,000.