Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1. From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill shall be valued at three years purchase of the average profit of last five years . The profits and losses of the past five years are:
Profit – Year ended 31st March, 2014 – Rs. 1,00,000; 2015 – Rs. 1,50,000; 2017 – Rs.2,00,000; 2018 – Rs. 2,00,000; Loss – Year ended 31st March, 2016 – Rs. 50,000. Pass the journal entries showing the working.
