The correct answer is: C. C’s account is debited by Rs. 3,000.
Explanation:
A and B are partners sharing profits in the ratio of 3 : 2. Their books showed goodwill at Rs. 3,000. C is admitted with $\frac{1}{4}$ share of profits and brings Rs. 10,000 as his capital. But, he is not able to bring in cash for his share of the goodwill of Rs. 3,000.
In this case, C’s capital will be Rs. 10,000 and his share of goodwill will be Rs. 3,000. Since he is not able to bring in cash for his share of the goodwill, he will remain as a debtor for Rs. 3,000.
The journal entry for this transaction will be:
Dr. C’s Capital A/c 3,000
Cr. Goodwill A/c 3,000
This entry will increase C’s capital account by Rs. 3,000 and will also increase the goodwill account by Rs. 3,000. The goodwill account will be shown as an asset in the balance sheet.
The following are the other options and their explanations:
A. Goodwill is raised by Rs. 12,000. This option is incorrect because the goodwill is only raised by Rs. 3,000, which is C’s share of the goodwill.
B. C will remain as debtor for Rs. 3,000. This option is correct because C is not able to bring in cash for his share of the goodwill, he will remain as a debtor for Rs. 3,000.
C. C’s account is debited by Rs. 3,000. This option is correct because the journal entry for this transaction will debit C’s capital account by Rs. 3,000.
D. Goodwill is raised by Rs. 9,000. This option is incorrect because the goodwill is only raised by Rs. 3,000, which is C’s share of the goodwill.