Punch and Judy have shared profits and losses in the ratio of 2: 1. On 1 October
Question:
Punch and Judy have shared profits and losses in the ratio of 2: 1. On 1 October 2004 they agree to share profits and losses as follows in future: Punch 3/5, Judy 2/5. Goodwill is valued at $18 000. The balances on their Capital accounts before the change in the profit/loss-sharing ratio are: Punch $36 000; Judy $14 000. A Goodwill account is not to be opened in the books.
Required
(a) Calculate the adjustments to be made to the Capital accounts.
(b) Prepare the partners' Capital accounts to show the adjustments for Goodwill.
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1 Calculate the Adjustments for Goodwill The change in profitsharing ratios means that Judy will get ...View the full answer
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