Q. A, B, and C were partners sharing profits and losses in the ratio Of l:3:2 respectively. B retired when the capitals of A, B and C before the necessary adjustments stood at Rs.2,19,500, Rs.1,14,000 and Rs. 1,16,500 respectively. On the date of retirement, firm's goodwill was valued at Rs. 2,16,000 and Rs. 27,000, General Reserve Rs. 63,000 and the Cash and Bank Balance on that date was Rs. 1,86,000. B was to be paid through cash brought in by A and C in such a way as to make their capitals proportionate to their new profit-sharing ratio of 5 : 3. Calculate the amount Of cash to be paid off or to be brought in by the continuing partners assuming that a minimum Cash and Bank Balance of Rs. 1,00,000 was to be maintained and pass the necessary Journal entries.
↵Dear Student,
Calculation of Gaining Ratio
Calculation of B's share of Goodwill
Total Capital = A's Capital + C's Capital + Amount Payable to B + Desired Cash Balance - Existing Cash Balance
= 1,96,500 + 91,500 + 1,98,000 + 1,00,000 - 1,86,000 = Rs 4,00,000
| Journal | |||||
| Particulars | L.F. | Debit Amount (Rs) |
Credit Amount (Rs) |
||
| Cash/Bank A/c | Dr. | 1,12,000 | |||
| To A’s Capital A/c | 53,500 | ||||
| To C’s Capital A/c | 58,500 | ||||
| (Partners bring in cash to adjust capitals as per new ratio) | |||||
| B’s Capital A/c | Dr. | 1,98,000 | |||
| To Cash/Bank A/c | 1,98,000 | ||||
| (Cash paid to B) | |||||
| Particulars | A | B | C |
| Opening Capital | 2,19,500 | 1,14,000 | 1,16,500 |
| Goodwill | (39,000) | 72,000 | (33,000) |
| Loss on Revaluation (4:3:2) | (12,000) | (9,000) | (6,000) |
| General Reserve (4:3:2) | 28,000 | 21,000 | 14,000 |
| Capital after adjustments | 1,96,500 | 1,98,000 | 91,500 |
| New Capital | 2,50,000 | 1,50,000 | |
| Amount brought | 53,500 | Paid-off | 58,500 |
Calculation of Gaining Ratio
Calculation of B's share of Goodwill
Total Capital = A's Capital + C's Capital + Amount Payable to B + Desired Cash Balance - Existing Cash Balance
= 1,96,500 + 91,500 + 1,98,000 + 1,00,000 - 1,86,000 = Rs 4,00,000