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CMA Intermediate · Financial Accounting · Admission of Partner

P and Q share profits 3:2. R is admitted for a 1/4 share. R acquires 1/8 from P and 1/8 from Q. The firm's goodwill is valued at Rs 1,20,000 and R brings his share of goodwill in cash. By how much is Q's capital account credited on account of goodwill?

Q is credited Rs 15,000. R's goodwill share is one quarter of Rs 1,20,000, which is Rs 30,000, and since P and Q each sacrifice 1/8, they share it equally, giving Rs 15,000 each.

  1. ARs 15,000Correct
  2. BRs 18,000
  3. CRs 12,000
  4. DRs 30,000

Explanation

R's share of goodwill = 1/4 x 1,20,000 = Rs 30,000. The sacrifice is equal (1/8 each), so the ratio is 1:1 and each partner gets Rs 15,000. Using the old ratio would give Q Rs 12,000, which is wrong.

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