1.

A. B and C are partners sharing profits and losses in the ratio of 5:4:1. It was decided that with effect from 1st April 2016 the profit sharing ratio will be 9:6:5. Goodwill is to be valued at 2 year's purchase of average of 3 year's profits. The profits for 2013-14, 2014-15 and 2015-16 were Rs 48,000, Rs 42,000 and Rs 60,000 respectively. Pass the necessary journal entry for the treatment of goodwill.

Answer»

A. B and C are partners sharing profits and losses in the ratio of 5:4:1. It was decided that with effect from 1st April 2016 the profit sharing ratio will be 9:6:5. Goodwill is to be valued at 2 year's purchase of average of 3 year's profits. The profits for 2013-14, 2014-15 and 2015-16 were Rs 48,000, Rs 42,000 and Rs 60,000 respectively.

Pass the necessary journal entry for the treatment of goodwill.



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