Gce Model Questions Vol1 2024 Financial Accounting Question 29

Three partners A, B and C run a business with profit‑sharing ratios 3 : 2 : 1. Their capital balances at the start of the year are: - A: £60,000 - B: £40,000 - C: £20,000 A new partner D is admitted. The agreement is as follows: 1. D brings in £30,000 cash for a 20 % share of future profits. 2. Goodwill of £24,000 is recognised and is shared among the existing partners in the old profit‑sharing ratio. 3. After admission the profit‑sharing ratios become A : B : C : D = 6 : 4 : 2 : 3 (total 15 parts), which gives D a 20 % share. 4. The existing partners sacrifice part of their profit share to accommodate D; the cash brought in by D is allocated to them in proportion to the amount of profit share each sacrifices. Calculate: (a) the amount of goodwill credited to each existing partner; (b) the cash each existing partner receives from D; (c) the new capital balance of each partner after admission (including goodwill credit and cash received).