Illustration of change in profit sharing ratio, Financial Accounting

Illustration of change in profit sharing ratio

A, B and C have been trading as equal partners having capital contributions of £400,000, £300,000 and £200,000 respectively. They deaded to change their profit sharing ratio to 3:2:1. Goodwill was agreed at £150,000.

Required:

Prepare their capital accounts to show their new capital balances assuming that goodwill in not to be retained in the accounts.

Capital account

 

A

B

C

 

A

B

C

Goodwill

75,000

50,000

25,000

Bal. b/d

400,000

300,000

200,000

Bal. c/d

375,000

300,000

225,000

Goodwill

  50,000

  50,000

  50,000

 

450,000

350,000

250,000

 

450,000

350,000

250,000

Posted Date: 12/11/2012 6:08:35 AM | Location : United States







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