Multiple choice

X, Y and Z are partners sharing in the ratio 4 : 3 : 3. X retires and the new profit ratio is 3 : 7. Goodwill of the firm is valued at Rs. 20,000. What will be the journal entry?

  1. Debit Z and credit X's capital by Rs. 20,000.

  2. Debit Z and credit X's capital by Rs. 8,000.

  3. Debit Z and credit Y's capital by Rs. 20,000.

  4. Debit Z and credit Y's capital by Rs. 8,000.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Y's gain = 3/10 - 3/10, i.e.nil Z's gain = 7/10 - 3/1 = 4/10 The gaining partner is Z only and he will be debited with 20,000 x 4/10.

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