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Simon and Tariq were equal partners in a business, each with capital of $40,000. It was agreed that Vanessa should join the partnership, with all three partners sharing profits equally. For the purpose of admitting the new partner, the value of the goodwill of the business was agreed at $60,000, but goodwill would not be maintained in the accounts. Vanessa introduced capital of $22,000 to the business.
What was the balance on the capital accounts of Simon after the admission of Vanessa to the partnership?
Answer in the book: $40,000
Doubt: I think the answer should be $50,000.
I am not convinced with the answer in the book.
Sir, please explain this.
If gw not to be maintained then:
CR old partners in old PSR
DR new partnership in New PSR..
So, Cr S and T 30,000 each
Dr S, T, V 20,000 each.
S is credited a net 10,000.
So, S’s balance is 40,000 + 10,000 = 50,000.
You are right and the book is wrong.