ADMISSION OF NEW PARTNERS

Question One
A and B share profits in the ratio – A, 5/8 and B 3/8. C is admitted as partner. He brings
in Tshs. 70,000 as his capital and Tshs. 48.000 as goodwill. The new profit-sharing ratio
among A, B and C respectively is agreed to be 7 : 5 : 4 respectively.

Pass Journal entries:

Question Two
A and B are partners sharing profits and losses in the ratio 3:2 respectively. They admit
C as partner who is unable to bring goodwill in cash but pays Tshs. 96,000 as his capital.
The goodwill of the firm is to be valued at two years’ purchase of three years’ profits.
The profits for the three years were Tshs. 30,000, Tshs. 24,000 and X 27,000. An
adjustment entry is to be passed for C’s share of goodwill. The new ratio will be 5 : 2 :
2.
Pass Journal entries:

Question Three
X and Y were partners sharing profits in the ratio of 5 : 4 respectively. On 1st April, 2012
they admitted Z as a new partner; all the partners agreeing to share future profits
equally. On the date of admission of the new partner, there was a goodwill account in
the old firm’s ledger showing a balance of Tshs 18,000.

The current value of firm’s goodwill was placed at Tshs. 36,000. Z paid Tshs. 50,000 by
way of his capital. He also paid an appropriate amount for his share of goodwill. X and Y
wrote off the goodwill account before Z’s admission.

Pass Journal entries:

Question Four
The following was the Balance Sheet of A, B and C sharing profits and losses in the
proportion of 6/14, 5/14 and 3/14 respectively:

They agreed to take D into partnership and give 1/8th share of profits on the following
terms:
(1) That D brings in Tshs. 48,000 as his capital.

(2) That furniture be written down by Tshs. 2,760 and stock be depreciated by 10%.

(3) That provision of Tshs. 3,960 be made for outstanding repair bills.

(4) That the value of land and buildings be written up to Tshs. 195,300.

(5) That the value of goodwill be fixed at Tshs. 28,000 and an adjustment entry be

passed for D’s share of goodwill.

(6) That the capitals of A,B and C be adjusted on the basis of D’s capital by opening

current accounts.

Give the necessary journal entries, and the balance sheet of the firm as newly

constituted.

Question Five
The balance sheet of a partnership firm of X and Y, who were sharing profits in the ratio
of 5: 3 respectively, as on 31st March, 2012 was as follows:

On the above date, Z was admitted on the following terms:

(i) Z would get 1/5th share in the profits.

(ii) Z would pay Tshs. 120,000 as capital and Tshs. 16,000 for his share of

goodwill.

(iii) Machinery would be depreciated by 10% and building would to be

appreciated by 30%. A provision for bad debts @ 5% on debtors would be

created. An unrecorded liability amounting to Tshs. 3,000 for repairs to

building would be recorded in the books of account.
 (iv) Immediately after Z’s admission, goodwill account would be written off.

Thereafter, the capital accounts of the old partners would be adjusted

through the necessary current accounts in such a manner that the capital

accounts of all the partners would be in their profit showing ratio.

Prepare revaluation account, capital accounts and the initial balance sheet of the new
firm.