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P, Q and R are equal partners in a firm...

P, Q and R are equal partners in a firm. R retires and the goodwill of the firm is valued at Rs. 3,60,000 . No goodwill account appears as yet in the books of the firm. P and Q agree to share future profits in the ratio of 3 : 2. Pass necessary journal entry for goodwill.

Text Solution

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(a) When Goodwill is adjusted through Partner's Capital Account :

Note : Gaining Ratio = New Ratio - Old Ratio
P Gains = `3/5 - 1/3 = (9-5)/15 = 4/15`
Q Gains = ` 2/5 - 1/3 = (6-5)/15 = 1/15`
As such, gaining ratio between P and Q = 4 : 1
ALTERNATE SOLUTION :
(b) When Goodwill is raised and written off :
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