Illustration of admission of a new partner, Financial Accounting

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Illustration of Admission of a new partner

XYZ have been trading as equal partners having capital contributions of £300,000, £250,000 and £200,000 respectively.  They  agreed  to admit W who agrees to pay capital of £350 which is inclusive of his share of goodwill.  The new profit sharing ration will not be X:Y:Z:W : 4:3:2:1.  Goodwill has been agreed at £200,000.

Required:

Prepare the partners capital accounts to record admission of W and assuming that Goodwill is not to be retained in the accounts.

Capital account

 

X

Y

X

W

 

X

Y

Z

W

Goodwill

80

160

40

20

Bal. b/d

300

250

200

-

Bal c/d

286.667

256.667

226.666

330

Goodwill

66.667

66.667

66.666

-

 

 

 

 

 

bank

 

 

 

350

 

366.667

316.667

266.666

350

 

366.667

316.667

226.667

350


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