question_answer

X, Y and Z are partners sharing profits and losses in the ratio of 14 : 5 : 6 respectively. Y retires and surrenders his \[\frac{2}{25}th\]share in favour of X. The goodwill of the firm is valued at 2 years' purchase of super profits based on average profits of last 3 years. The profits of the last three years are: Rs. 1,00,000, Rs. 1,10,000 and Rs. 1,20,000 respectively. The normal profits of the similar firms are Rs. 60,000. Goodwill already appears in the books of the firm at Rs. 1,50,000. The profit for the first year after the Y?s retirement was Rs. 2,00,000. Give necessary journal entries to adjust goodwill and distribute profits and show your workings clearly.

Answer:

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