Page 67 - MA-12

3.26 Double Entry Book Keeping (Section A)—ISC XII

Working Notes:

1. Calculation of Goodwill of Firm:
Average Profit = ` 2,50,000
Overvaluation of Stock = ` 1,5000
Adjusted Average Profit = ` 2,50,000 – ` 15,000 (Note) = ` 2,35,000
Normal Profit = Capital Employed (Investment) × NRR

15
= ` 14,00,000 × = ` 2,10,000
100
Super Profit = Adjusted Average Profit – Normal Profit
= ` 2,35,000 – ` 2,10,000 = ` 25,000
Goodwill = Super Profit × 2
= ` 25,000 × 2 = ` 50,000.
2. Calculation of Sacrifice/Gain of each Partner:

Particulars Rohan Sohan Mohan

A. Old Share 5/10 4/10 1/10
B. New Share 1/3 1/3 1/3
C. Sacrifice/Gain (A – B) 5/10 – 1/3 4/10 – 1/3 1/10 – 1/3

= 5/30 (Sacrifice) 2/30 (Sacrifice) 7/30 (Gain)

Note: Overvaluation of stock increases the net profit. Hence it has been deducted to calculate adjusted
average profit.

3. Adjustment of Goodwill:
Mohan’s Capital A/c ...Dr. ` 11,667
To Rohan’s Capital A/c ` 8333
To Sohan’s Capital A/c ` 3,334

4. Total Capital of the Firm = ` 12,00,000
Capital of each partner in the new firm as per new PGR will be ` 4,00,000.

5.
Dr. BANK ACCOUNT Cr.

Particulars ` Particulars `

To Balance b/d 4,20,000 By Rohan’s Capital A/c 4,43,334
To Mohan’s Capital A/c 64,667 By Sohan’s Capital A/c 91,333
To Balance c/d 50,000
5,34,667 5,34,667