Q.Using the data of Question 2 (X, Y, Z sharing 3 : 2 : 1; Y retires; gaining ratio of X and Z is 3 : 5), pass the journal entry for treatment of goodwill if the firm's goodwill on Y's retirement is valued at ₹96,000.

Y's share of the firm's goodwill has to be worked out first, and then charged only to the gaining partners, in their gaining ratio.

Step 1 — Y's share of the firm's goodwill.

Y's old profit share = 2/6. Firm's goodwill = ₹96,000.

Y's share of goodwill = 96,000 × 2/6 = ₹32,000.

Step 2 — Distribute this amount between the gaining partners, X and Z, in their gaining ratio of 3 : 5 (from Question 2).

• X's share of the charge = 32,000 × 3/8 = ₹12,000
• Z's share of the charge = 32,000 × 5/8 = ₹20,000

Check: 12,000 + 20,000 = 32,000 ✓ — matches Y's full share of goodwill.

Journal Entry

A frequent slip is charging the goodwill to X and Z in the OLD ratio (3 : 1, i.e. their mutual old proportion) or in the new ratio (5 : 3) instead of the GAINING ratio (3 : 5) — always use the gaining ra …