The journal entry for treatment of goodwill, when a new partner brings his share of goodwill in cash and one of the old partners gains, involves the following:(A) Gaining Partner’s Capital Account is debited(B) Premium for Goodwill Account is debited(C) Sacrificing Partner’s Capital Account is credited(D) Gaining Partner’s Capital Account is credited Choose the correct answer from the options given below:
- A(A), (B) and (D) only
- B(A), (B) and (C) only
- C(A), (C) and (D) only
- D(B), (C) and (D) only
Solution & Step-by-step Explanation
When a new partner brings goodwill in cash, the receipt is credited to Premium for Goodwill.When distributing this premium, if an existing partner also finishes with a net gain post-reconstitution:Premium for Goodwill Account is debited (to clear out the balance).Gaining Partner’s Capital Account must also be debited for their respective personal gain slice.Only the Sacrificing Partner’s Capital Account gets credited.The journal entry layout is:
Statements (A), (B), and (C) are correct.
Statements (A), (B), and (C) are correct.