question_answer

Read the following hypothetical text and answer the given questions:

Casio enterprises is a partnership business with Zen, Ben and Ken as partners engaged in production and sales of electrical items and equipment.

Their capital contributions were Rs. 25,00,000, Rs. 25,00,000 and Rs. 40,00,000 respectively with the profit the sharing ratio of 5 : 5 : 8. As they are now looking forward to expanding their business, it was decided that they would bring in sufficient cash to double their respective capitals.

This was duly followed by Zen and Ben, but due to unavoidable reasons Ken could not do so and ultimately it was agreed that to bridge the shortfall in the required capital a new partner should be admitted who would bring in the amount that Ken could not bring and that the new partner would get share of profits equal to half of Ken's share which would be sacrificed by Ken only.

Consequent to this agreement Ren was admitted and he brought in the required capital and Rs. 15,00,000 as premium for goodwill.

Based on the above information you are required to answer the following questions:

What will be correct journal entry for distribution of premium for goodwill brought in by Ren?

A)

Ren's Capital A/c                  Dr. 15,00,000

To Ken's Capital A/c                                        15,00,000

B)

Premium for Goodwill A/c     Dr. 15,00,000

To Ken's Capital A/c                                       15,00,000

C)

Premium for Goodwill A/c     Dr. 15,00,000

To Zen's Capital A/c                                         4,16,666

To Ben's Capital A/c                                        4,16,666

To Ren's Capital A/c                                        6,66,668

D)

Premium for Goodwill A/c     Dr. 15,00,000

To Zen's Capital A/c                                        5,00,000

To Ben's Capital A/c                                        5,00,000

To Ren's Capital A/c                                        5,00,000