Below given the details related to a firm. Name of partners - Manju and raju, Profit sharing ratio - 3 : 2

Question

Below given the details related to a firm.

Name of partners	Manu and raju
Profit sharing ratio	3 : 2
Valuation of goodwill	2 years purchase of super profit
Date of admission of new partner	01/04/2008
Name of new partner	Sanoj
Capital brought in by him	Rs 50,000
Average profit	40,000
Normal rate of return	10%

 

Existing Assets and liablities	Books value	Revalued Amt.
Cash	20,000	........
Bank	20,000	.......
Debtors	31,500	30,000
Stock	30,000	40,000
Furniture	20,0000	20,000
Creditors	11,500	10,000
Capital : manu             : Raju	60,000 50,000	....... .......

Can you analyse the adjustment on admission of a new partner and show the balance sheet after admission.

Answer 1

Revaluation A/c

Capital Accounts

Balance Sheet

Working Note 

Goodwill Calculation: Here, Goodwill is calculated on the basis of super profit method. 

Goodwill = Super profit × No. years purchase Super profit = Actual or Average profit – Normal profit 

Normal profit = Capital Employed × Normal rate of return 

Capital employed = Asset – Liabilities = (10,000 + 20,000 + 31,500 + 30,000+ 20,000) – 11,500 = 1,00,000 

Normal profit = 1,00,000 × 10/100 = 10,000

Super profit =40,000 – 10,000 = 30,000 

Goodwill = 30,000 × 2 = 60,000 New partner’s share of Goodwill – 60,000 × 1/3 = 20,000 

Sacrifacina ratio Manu = 3/5 – 1/3 = 9 – 5/15 = 4/15 

Raju = 2/5 – 1/3 = 6 – 5/15 = 1/15 

Sacrificing ratio = 4:1 Manu = 3/5 – 1/3 = 9 – 5/15 = 4/15 

Manu’s Sacrifice = 20,000 × 4/5 = 16,000 

Raju’s Sacrifice = 20,000 × 1/5 = 4,000 [Hint: New ratio 1:1:1].