Answer :
Sure, let's work through the problem step-by-step.
### Given Information:
- Partners: M, N, L
- Old Profit Sharing Ratio (M, N, L): 3 : 2 : 1
- New Partner: O, who brings cash capital ₹ 4,50,000 and goodwill ₹ 1,50,000
- New Profit Sharing Ratio (M, N, L, O): 6 : 4 : 2 : 3
### Step 1: Determine the Old Profit Sharing Ratio in Terms of Total Shares
- M's share: [tex]\( \frac{3}{3+2+1} = \frac{3}{6} \)[/tex]
- N's share: [tex]\( \frac{2}{6} \)[/tex]
- L's share: [tex]\( \frac{1}{6} \)[/tex]
### Step 2: Calculate Each Old Partner's Share of the Goodwill ₹1,50,000
Since O's ₹1,50,000 goodwill is shared among M, N, and L based on their old profit-sharing ratios:
- M's share of goodwill: [tex]\( 1,50,000 \times \frac{3}{6} = ₹75,000 \)[/tex]
- N's share of goodwill: [tex]\( 1,50,000 \times \frac{2}{6} = ₹50,000 \)[/tex]
- L's share of goodwill: [tex]\( 1,50,000 \times \frac{1}{6} = ₹25,000 \)[/tex]
### Step 3: Journal Entries
Based on whether the goodwill is retained in the firm or withdrawn by old partners, the journal entries would differ.
#### (a) Goodwill is retained in the firm
Since goodwill is retained in the firm, the credit to the old partners' capital accounts is straightforward.
Journal Entry:
1. Bank Account Dr. ₹4,50,000
To O's Capital Account ₹4,50,000
(Being cash brought in by O as capital)
2. O's Capital Account Dr. ₹1,50,000
To M’s Capital Account ₹75,000
To N’s Capital Account ₹50,000
To L’s Capital Account ₹25,000
(Being goodwill brought in by O credited to old partners' capital accounts)
#### (b) Goodwill is withdrawn by old partners
If goodwill is withdrawn by the old partners, they are paid out their respective shares of the goodwill.
Journal Entry:
1. Bank Account Dr. ₹4,50,000
To O's Capital Account ₹4,50,000
(Being cash brought in by O as capital)
2. O's Capital Account Dr. ₹1,50,000
To M’s Capital Account ₹75,000
To N’s Capital Account ₹50,000
To L’s Capital Account ₹25,000
(Being goodwill brought in by O credited to old partners' capital accounts)
3. M’s Capital Account Dr. ₹75,000
N’s Capital Account Dr. ₹50,000
L’s Capital Account Dr. ₹25,000
To Bank Account ₹1,50,000
(Being goodwill withdrawn by old partners)
### Step 4: Determine the New Profit Sharing Ratio
The new profit-sharing ratio is given as 6:4:2:3 for M, N, L, and O respectively.
Summary:
- The journal entries are passed based on whether the goodwill is retained or withdrawn.
- The old partners' shares of the goodwill are ₹75,000 for M, ₹50,000 for N, and ₹25,000 for L.
- The new profit-sharing ratio is 6:4:2:3 for M, N, L, and O.
By following these steps, we ensure that all entries are accurate and reflective of the given situation.
### Given Information:
- Partners: M, N, L
- Old Profit Sharing Ratio (M, N, L): 3 : 2 : 1
- New Partner: O, who brings cash capital ₹ 4,50,000 and goodwill ₹ 1,50,000
- New Profit Sharing Ratio (M, N, L, O): 6 : 4 : 2 : 3
### Step 1: Determine the Old Profit Sharing Ratio in Terms of Total Shares
- M's share: [tex]\( \frac{3}{3+2+1} = \frac{3}{6} \)[/tex]
- N's share: [tex]\( \frac{2}{6} \)[/tex]
- L's share: [tex]\( \frac{1}{6} \)[/tex]
### Step 2: Calculate Each Old Partner's Share of the Goodwill ₹1,50,000
Since O's ₹1,50,000 goodwill is shared among M, N, and L based on their old profit-sharing ratios:
- M's share of goodwill: [tex]\( 1,50,000 \times \frac{3}{6} = ₹75,000 \)[/tex]
- N's share of goodwill: [tex]\( 1,50,000 \times \frac{2}{6} = ₹50,000 \)[/tex]
- L's share of goodwill: [tex]\( 1,50,000 \times \frac{1}{6} = ₹25,000 \)[/tex]
### Step 3: Journal Entries
Based on whether the goodwill is retained in the firm or withdrawn by old partners, the journal entries would differ.
#### (a) Goodwill is retained in the firm
Since goodwill is retained in the firm, the credit to the old partners' capital accounts is straightforward.
Journal Entry:
1. Bank Account Dr. ₹4,50,000
To O's Capital Account ₹4,50,000
(Being cash brought in by O as capital)
2. O's Capital Account Dr. ₹1,50,000
To M’s Capital Account ₹75,000
To N’s Capital Account ₹50,000
To L’s Capital Account ₹25,000
(Being goodwill brought in by O credited to old partners' capital accounts)
#### (b) Goodwill is withdrawn by old partners
If goodwill is withdrawn by the old partners, they are paid out their respective shares of the goodwill.
Journal Entry:
1. Bank Account Dr. ₹4,50,000
To O's Capital Account ₹4,50,000
(Being cash brought in by O as capital)
2. O's Capital Account Dr. ₹1,50,000
To M’s Capital Account ₹75,000
To N’s Capital Account ₹50,000
To L’s Capital Account ₹25,000
(Being goodwill brought in by O credited to old partners' capital accounts)
3. M’s Capital Account Dr. ₹75,000
N’s Capital Account Dr. ₹50,000
L’s Capital Account Dr. ₹25,000
To Bank Account ₹1,50,000
(Being goodwill withdrawn by old partners)
### Step 4: Determine the New Profit Sharing Ratio
The new profit-sharing ratio is given as 6:4:2:3 for M, N, L, and O respectively.
Summary:
- The journal entries are passed based on whether the goodwill is retained or withdrawn.
- The old partners' shares of the goodwill are ₹75,000 for M, ₹50,000 for N, and ₹25,000 for L.
- The new profit-sharing ratio is 6:4:2:3 for M, N, L, and O.
By following these steps, we ensure that all entries are accurate and reflective of the given situation.
