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Page No 3.32:

Answer:

Old Ratio (A and B) = 1 : 1

New Ratio (A and B) = 4 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

 

A’s Gain = 1/14

B’s Sacrifice = 1/14

Page No 3.32:

Answer:

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 5 : 2 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

 

Z’s Gain = 1/10

Y’s Sacrifice = 1/10

Page No 3.32:

Answer:

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

 

Y’s Gain = 1/30

Z’s Gain = 4/30

X’s Sacrifice = 5/30

Page No 3.32:

Question 4:

A, B and C are partners sharing profits and losses in the ratio of 5 : 4 : 1. Calculate new profit-sharing ratio, sacrificing ratio and gaining ratio in each of the following cases:
Case 1. C acquires 1/5th share from A.
Case 2. c acquires 1/5th share equally form A and B.
Case 3. A, B and C will share future profits and losses equally.
Case 4. C acquires 1/10th share of A and 1/2 share of B.

Answer:

Calculation of New Profit Sharing RatioCase 1:A:B:C=5:4:1(Old Ratio)C acquires 15th from A A's sacrifice = 15 C's gain = 15A=51015=5210=310B=410C=110+15=1+210=310A:B:C=3:4:3Case 2:A:B:C=5:4:1(Old Ratio)C acquires 15th share equally from A A's sacrifice = 110B's sacrifice = 110C's gain = 15A=510110=5110=410B=410110=4110=310C=110+15=1+210=310A:B:C=4:3:3Case 3:A:B:C=5:4:1(Old Ratio)A:B:C=1:1:1(New Ratio)A=51013=151030=530(Sacrifice)B=41013=121030=230(Sacrifice)C=11013=31030=730(Gain)Case 4:A:B:C=5:4:1(Old Ratio)A's sacrifice to C=510×110=120B's sacrifice to C=410×12=420C's gain=120+420=520A=510120=10120=920B=410420=8420=420C=110+520=2+520=720A:B:C=9:4:7



Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

C’s Capital A/c  

Dr.

 

3,000

 

 

To A’s Capital A/c

 

 

 

3,000

 

(Adjustment of goodwill made on change in profit sharing ratio)

 

 

 

 

 

 

 

 

Working Notes:

Old Ratio (A, B and C) = 3 : 2 : 1

New Ratio (A, B and C) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

Goodwill of the firm = Rs 18,000

A will receive for goodwill =

C will give for goodwill =

Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Y’s Capital A/c

Dr.

 

3,000

 

 

Z’s Capital A/c  

Dr.

 

12,000

 

 

To X’s Capital A/c

 

 

 

15,000

 

(Amount of goodwill adjusted on change in profit sharing ratio)

 

 

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Calculation of Goodwill

WN 3 Adjustment of Goodwill

Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Abbas’s Capital A/c

Dr.

 

60,000

 

 

     To Mandeep’s Capital A/c

 

 

 

60,000

 

(Adjustment entry made for change in ratio)

 

 

 

 

 

Working Notes:

WN1: Calculation of Sacrifice or Gain

Mandeep :Vinod :Abbas=3:2:1(Old Ratio)Mandeep :Vinod :Abbas=1:1:1(New Ratio)Sacrificing (or Gaining Ratio) = Old Ratio - New RatioMandeep's share=3613=326=16(Sacrifice)Vinod's share=2613=226=0Abbas's share=1613=126=16(Gain)


WN2: Valuation of Goodwill

Goodwill=Average Profit×No. of years' Purchase               =1,20,000×3=Rs 3,60,000

Average Profit=Total Profits of past years givenNumber of years                        =1,00,000+1,50,000+2,00,000+2,00,00050,0005=Rs 1,20,000

WN3: Adjustment of  Goodwill



Amount debited to Abbas's Capital A/c=3,60,000×16=Rs 60,000 (share of gain)Amount credited to Mandeep's Capital A/c=3,60,000×16=Rs 60,000 (share of sacrifice)

Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Sumit’s Capital A/c

Dr.

 

50,000

 

 

Amit’s Capital A/c

Dr.

 

50,000

 

 

    To Gunit’s Capital A/c

 

 

 

1,00,000

 

(Adjustment entry made for change in ratio)

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Calculation of Sacrifice or Gain

Gunit's sacrifice=410×12=15 and it would be acquired equally by Sumit and Amit i.e. 110eachGunit's new share=41015=4210=210Sumit's new share=310+110=3+110=410Amit's new share=310+110=3+110=410Gunit:Sumit:Amit=2:4:4=1:2:2


 WN2: Adjustment of Goodwill
Amount to be debited in Amit's Capital A/c=5,00,000×110=Rs 50,000 (share of gain)Amount to be debited in Sumit's Capital A/c=5,00,000×110=Rs 50,000 (share of gain)Amount to be credited in Gunit's Capital A/c = 5,00,000×15=Rs 1,00,000 (share of sacrifice)

 

Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

X’s Capital A/c

Dr.

 

6,000

 

 

Y’s Capital A/c

Dr.

 

3,600

 

 

Z’s Capital A/c 

Dr.

 

2,400

 

 

To Goodwill A/c

 

 

 

12,000

 

(Goodwill written off)

 

 

 

 

 

 

 

 

 

Y’s Capital A/c

Dr.

 

1,000

 

 

Z’s Capital A/c

Dr.

 

4,000

 

 

To X’s Capital A/c

 

 

5,000

 

(Amount of goodwill adjusted on change in profit sharing ratio)

 

 

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Writing off of Old Goodwill

WN 3 Adjustment of Goodwill

Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

A’s Capital A/c

Dr.

 

6,000

 

 

To B’s Capital A/c

 

 

6,000

 

(Adjustment of profit for 2016-17 on change in profit sharing ratio)

 

 

 

 

 

 

 

 

 

B’s Capital A/c

Dr.

 

9,000

 

 

To A’s Capital A/c

 

 

9,000

 

(Adjustment of goodwill made on change in profit sharing ratio)

 

 

 

 

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

Cr.

Particulars

A

B

Particulars

A

B

B's Capital A/c

6,000

Balance b/d

1,50,000

90,000

(Adjustment of profit)

 

 

A's Capital A/c

6,000

A's Capital A/c

9,000

(Adjustment Profit)

 

 

(Adjustment of Goodwill)

 

 

B's Capital A/c

9,000

Balance c/d

1,53,000

87,000

(Adjustment of Goodwill)

 

 

 

1,59,000

96,000

 

1,59,000

96,000

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (A and B) = 2 : 1

New Ratio (A and B) = 3 : 2

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Adjustment of Profit for 2016-17

WN 3 Calculation of New Goodwill

Goodwill=Profit of 2014-15 +Profit of 2015-16               =60,000+75,000=Rs 1,35,000

WN 4
Adjustment of Goodwill

Page No 3.33:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Profit & Loss A/c

Dr.

 

1,50,000

 

 

  To X’s Capital A/c

 

 

 

90,000

 

  To Y’s Capital A/c

 

 

 

60,000

 

(Adjustment of balance in P&L A/c in old ratio)

 

 

 

 

Working Notes:

WN1 Calculation of Share of Profit and Loss A/c

X's share=1,50,000×35=90,000Y's share=1,50,000×25=60,000

 



Page No 3.34:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

A’s Capital A/c

Dr.

 

80,000

 

 

 B’s Capital A/c

Dr.

 

20,000

 

 

    To Profit & Loss  A/c

 

 

 

1,00,000

 

(Profit & Loss  distributed)

 

 

 

 

 

 

 

 

 

 

 

Page No 3.34:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Z’s Capital A/c

Dr.

 

5,400

 

 

To X’s Capital A/c

 

 

 

5,400

 

(Adjustment for General Reserve, Profit and Loss A/c and Advertisement Suspense account is made on change in profit sharing ratio)

 

 

 

 

 

 

 

 

Working Notes:

WN 1

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 2 : 3 : 5

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

Page No 3.34:

Question 14:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5 . Give the journal entry to distribute ' Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when:
(i) no information is given        (ii) there is no claim against it.

Answer:

(i) & (ii)

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Workmen Compensation Reserve A/c

Dr.

 

1,20,000

 

 

      To A’s Capital A/c

 

 

 

60,000

 

      To B’s Capital A/c

 

 

 

36,000

 

      To C’s Capital A/c

 

 

 

24,000

 

(Workmen Compensation Reserve distributed)

 

 

 

 

 

Note:

In the both the cases, Workmen Compensation Reserve should be distributed in old ratio i.e., 5:3:2.

Page No 3.34:

Question 15:

X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5 . Give the journal entry to distribute ' Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when there is a claim  of ₹ 80,000 against it.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Workmen Compensation Reserve A/c

Dr.

 

1,20,000

 

 

  To X’s Capital A/c

 

 

 

20,000

 

  To Y’s Capital A/c

 

 

 

12,000

 

  To Z’s Capital A/c

 

 

 

8,000

    To Workmen Compensation Claim A/c       80,000

 

(Adjustment of balance in Workmen Compensation Reserve A/c in old ratio)

 

 

 

 

Working Notes:

WN1 Calculation of Share of Workmen Compensation Reserve
X's share=40,000×510=20,000Y's share=40,000×310=12,000Z's share=40,000×210=8,000

Page No 3.34:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Workmen Compensation Reserve A/c

Dr.

 

1,20,000

 

 

Revaluation A/c

Dr.

 

30,000

 

 

    To Provision for Workmen Compensation Claim A/c

 

 

 

1,50,000

 

(Provision created and shortfall charged to Revaluation A/c)

 

 

 

 

 

 

 

 

 

 

 

X’s Capital A/c

Dr.

 

15,000

 

 

Y’s Capital A/c

Dr.

 

9,000

 

 

Z’s Capital A/c

Dr.

 

6,000

 

 

    To Revaluation A/c

 

 

 

30,000

 

(Loss on revaluation transferred to Partners’ Capital A/c)

 

 

 

 

Page No 3.34:

Question 17:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5 . Give the journal entry to distribute 'Investments Fluctuation Reserve' of ₹ 20,000 at the time of change in profit-sharing ratio, when investment (market value ₹  95,000) appears in the books at ₹  1,00,000

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Investment Fluctuation Reserve A/c

Dr.

 

5,000

 

 

  To Investments A/c

 

 

5,000

 

(Adjustment for decrease in the value of investments)

 

 

 

 

 

 

 

 

 

 

Investment Fluctuation Reserve A/c

Dr.

 

15,000

 

 

  To A’s Capital A/c

 

 

 

7,500

 

  To B’s Capital A/c

 

 

 

4,500

 

  To C’s Capital A/c

 

 

 

3,000

 

(Adjustment of balance in Investment Fluctuation Reserve A/c in old ratio)

 

 

 

 

Working Notes:
WN1 Calculation of Share of Investment Fluctuation Reserve
A's share=15,000×510=7,500B's share=15,000×310=4,500C's share=15,000×210=3,000

Page No 3.34:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

(i)

Investment Fluctuation Reserve A/c

Dr.

 

60,000

 

 

   To Nitin’s Capital A/c

 

 

 

20,000

 

   To Tarun’s Capital A/c

 

 

 

20,000

 

   To Amar’s Capital A/c

 

 

 

20,000

 

(Investment Fluctuation Reserve distributed)

 

 

 

 

 

 

 

 

 

 

(ii)

Investment Fluctuation Reserve A/c

Dr.

 

60,000

 

 

   To Nitin’s Capital A/c

 

 

 

20,000

 

   To Tarun’s Capital A/c

 

 

 

20,000

 

   To Amar’s Capital A/c

 

 

 

20,000

 

(Investment Fluctuation Reserve distributed)

 

 

 

 

 

 

 

 

 

 

(iii)

Investment Fluctuation Reserve A/c

Dr.

 

60,000

 

 

   To Nitin’s Capital A/c

 

 

 

20,000

 

   To Tarun’s Capital A/c

 

 

 

20,000

 

   To Amar’s Capital A/c

 

 

 

20,000

 

(Investment Fluctuation Reserve distributed)

 

 

 

 

 

 

 

 

 

 

 

Investments A/c

Dr.

 

24,000

 

 

    To Revaluation A/c

 

 

 

24,000

 

(Investments revalued)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

24,000

 

 

   To Nitin’s Capital A/c

 

 

 

8,000

 

   To Tarun’s Capital A/c

 

 

 

8,000

 

   To Amar’s Capital A/c

 

 

 

8,000

 

(Revaluation profit transferred to Partners’ Capital A/c)

 

 

 

 

 

 

 

 

 

 

(iv)

Investment Fluctuation Reserve A/c

Dr.

 

60,000

 

 

   To Investment A/c

 

 

 

30,000

 

   To Nitin’s Capital A/c

 

 

 

10,000

 

   To Tarun’s Capital A/c

 

 

 

10,000

 

   To Amar’s Capital A/c

 

 

 

10,000

 

(Investment Fluctuation Reserve distributed)

 

 

 

 

 

 

 

 

 

 

(v)

Investment Fluctuation Reserve A/c

Dr.

 

60,000

 

 

Revaluation A/c

Dr.

 

30,000

 

 

     To Investment A/c

 

 

 

90,000

 

(Decrease in investments set off against IFR and balance debited to Revaluation A/c)

 

 

 

 

 

 

 

 

 

 

 

Nitin’s Capital A/c

Dr.

 

10,000

 

 

Tarun’s Capital A/c

Dr.

 

10,000

 

 

Amar’s Capital A/c

Dr.

 

10,000

 

 

      To Revaluation A/c

 

 

 

30,000

 

(Loss on revaluation transferred to Partners’ Capital A/c)

 

 

 



Page No 3.35:

Answer:

(i) If they do not want to show General Reserve in the new Balance Sheet

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

General Reserve A/c

Dr.

 

60,000

 

 

  To X’s Capital A/c

 

 

 

40,000

 

  To Y’s Capital A/c

 

 

 

20,000

 

(Adjustment of balance in General Reserve A/c in old ratio)

 

 

 

 


Working Notes:

WN1 Calculation of Share of General Reserve

X's share=60,000×23=40,000Y's share=60,000×13=20,000

 

(ii) If they want to show General Reserve in the new Balance Sheet

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Y’s Capital A/c

Dr.

 

4,000

 

 

  To X’s Capital A/c

 

 

 

4,000

 

(Adjustment of balance in General Reserve A/c in sacrificing/gaining ratio)

 

 

 

 

Working Notes:

WN1 Calculation of Gain/Sacrfice


Sacrificing Ratio=Old Ratio-New RatioX=23-35=115(sacrifice)Y=13-25=-115(gain)

WN2 Calculation of Compensation by Y to X

Amount to be compensated=60,000×115=4,000

 

Page No 3.35:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Y’s Capital A/c

Dr.

 

30,000

 

 

To X’s Capital A/c

 

 

 

30,000

 

(Adjustment mode for goodwill and General Reserve)

 

 

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Goodwill

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X and Y) = 2 : 3

New Ratio (X and Y) = 1 : 2

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 3 Adjustment of Goodwill

WN 4 Adjustment of General Reserve

WN 5 Net Adjustment of Goodwill and General Reserve

Particulars

X

Y

Adjustment of Goodwill

22,667 (Cr.)

22,667 (Dr.)

Adjustment of General Reserve

7,333 (Cr.)

7,333 (Dr.)

Net Amount

30,000 (Cr.)

30,000 (Dr.)

 

 

 

Page No 3.35:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Z’s Capital A/c

Dr.

 

760

 

 

To X’s Capital A/c

 

 

 

760

 

(Adjustment of revaluation profit made)

 

 

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Net Profit or Loss on Revaluation

Particulars Amount
(Rs)

Increase in Investment

3,000 (Cr.)

Decrease in Plant and Machinery

(5,000) (Dr.)

Increase in Land and Building

10,000 (Cr.)

Increase in Outstanding Expenses

(400) (Dr.)

Decrease in Sunday Debtors

(10,000) (Dr.)

Decrease in Trade Creditors

10,000 (Cr.)

Profit on Revaluation

7,600 (Cr.)

 

 

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 4 : 3 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

 

WN 3 Adjustment of Revaluation Profit

Page No 3.35:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

General Reserve A/c

Dr.

 

90,000

 

 

      To Ashish’s Capital A/c

 

 

 

30,000

 

      To Akash’s Capital A/c

 

 

 

30,000

 

      To Amit’s Capital A/c

 

 

 

30,000

 

(Reserve distributed)

 

 

 

 

 

 

 

 

 

 

 

Ashish’s Capital A/c

Dr.

 

2,000

 

 

Akash’s Capital A/c

Dr.

 

2,000

 

 

Amit’s Capital A/c

Dr.

 

2,000

 

 

     To Advertisement Suspense A/c

 

 

 

6,000

 

(Advertisement Suspense distributed)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

54,000

 

 

     To Stock A/c

 

 

 

15,000

 

     To Machinery A/c

 

 

 

25,000

 

     To Provision for Doubtful Debts A/c

 

 

 

4,000

 

     To Akash’s Capital A/c (Remuneration)

 

 

 

10,000

 

(Assets revalued)

 

 

 

 

 

 

 

 

 

 

 

Land & Building A/c

Dr.

 

62,000

 

 

    To Revaluation A/c

 

 

 

62,000

 

(Assets revalued)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

8,000

 

 

      To Ashish’s Capital A/c

 

 

 

2,666

 

      To Akash’s Capital A/c

 

 

 

2,666

 

      To Amit’s Capital A/c

 

 

 

2,667

 

(Profit made)

 

 

 

 

 

 

 

 

 

 



Page No 3.36:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Workmen Compensation Reserve A/c

Dr.

 

50,000

 

 

      To Provision for Workmen Compensation Claim A/c

 

 

 

20,000

 

      To P’s Capital A/c

 

 

 

12,000

 

      To Q’s Capital A/c

 

 

 

12,000

 

      To R’s Capital A/c

 

 

 

6,000

 

(Workmen Compensation Reserve distributed)

 

 

 

 

 

 

 

 

 

 

 

Land & Building A/c

Dr.

 

15,000

 

 

Stock A/c

Dr.

 

10,000

 

 

Outstanding expenses A/c

Dr.

 

5,000

 

 

     To Revaluation A/c

 

 

 

30,000

 

(Assets revalued)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

20,000

 

 

     To Machinery A/c

 

 

 

10,000

 

     To Provision for Doubtful Debts A/c

 

 

 

5,000

 

     To Bank A/c

 

 

 

5,000

 

(Assets revalued)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

10,000

 

 

      To P’s Capital A/c

 

 

 

4,000

 

      To Q’s Capital A/c

 

 

 

4,000

 

      To R’s Capital A/c

 

 

 

2,000

 

(Profit on revaluation transferred to Partners’ Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery A/c

   10,000

Land & Building A/c

   15,000

Provision for Doubtful Debts A/c

5,000

Stock A/c

10,000

Bank A/c (Auditors Fees)

5,000

Outstanding Expenses A/c

5,000

Profit transferred to:

 

 

 

P’s Capital A/c                                                

4,000

 

 

 

Q’s Capital A/c                                                         

4,000

 

 

 

R’s Capital A/c                                                         

2,000

10,000

 

 

 

65,000

 

65,000

 

 

 

 

 

Page No 3.36:

Question 24:

A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2 . Their Balance Sheet as at 31st March, 2017 stood as follows:
 

 

Liabilities

Assets

Capital A/cs:

 

Land and Building

3,50,000

A

2,50,000

 

Machinery

2,40,000
      B 2,50,000   Computers 70,000

C

2,00,000

7,00,000

Investments(Market value ₹ 90,000)

1,00,000

General Reserve

 

60,000

Sundry Debtors

50,000
Investments Fluctuation Reserve   30,000 Cash in Hand 10,000
Sundry Creditors   90,000 Advertisement Suspense 5,000
         

 

 

8,80,000

 

8,80,000

 

 

 

 

 


They decided to share profits equally w.e.f. 1st April, 2017. They also agreed that:
(i) Value of Land and Building be decreased by 5% .
(ii) Value of Machinery be increased. by 5%.
(iii) A Provision for  Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at ₹ 20,000 was unrecorded and is now to be recorded  in the books.
(v) Out of Sundry Creditors, ₹ 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years' purchase of last 3 years profits . Profits being for 2016-17₹ 50,000 (Loss); 2015-16₹2,50,000 and 2014-15₹ 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at a remuneration ( including expenses) of ₹ 5,000. Expenses came to ₹ 3,000.
Pass journal entries and prepare Revaluation Account.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

General Reserve A/c

Dr.

 

60,000

 

 

      To A’s Capital A/c

 

 

 

30,000

 

      To B’s Capital A/c

 

 

 

18,000

 

      To C’s Capital A/c

 

 

 

12,000

 

(Reserve distributed)

 

 

 

 

 

 

 

 

 

 

 

A’s Capital A/c

Dr

 

2,500

 

 

B’s Capital A/c

Dr.

 

1,500

 

 

C’s Capital A/c

Dr.

 

1,000

 

 

     To Advertisement Suspense A/c

 

 

 

5,000

 

(Advertisement Suspense distributed)

 

 

 

 

 

 

 

 

 

 

 

Investment Fluctuation Reserve A/c

Dr.

 

30,000

 

 

   To Investment A/c

 

 

 

10,000

 

   To A’s Capital A/c

 

 

 

10,000

 

   To B’s Capital A/c

 

 

 

6,000

 

   To C’s Capital A/c

 

 

 

4,000

 

(Investment Fluctuation Reserve distributed)

 

 

 

 

 

 

 

 

 

 

 

Machinery A/c

Dr.

 

12,000

 

 

Motor Cycle  A/c

Dr.

 

20,000

 

 

Creditors  A/c

Dr.

 

10,000

 

 

     To Revaluation A/c

 

 

 

42,000

 

(Assets revalued)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

 

 

25,000

 

 

     To Land & Building A/c

 

 

 

17,500

 

     To Provision for Doubtful Debts A/c

 

 

 

2,500

 

     To Bank A/c (Remuneration)

 

 

 

5,000

 

(Assets revalued)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

 

 

17,000

 

 

      To A’s Capital A/c

 

 

 

8,500

 

      To B’s Capital A/c

 

 

 

5,100

 

      To C ’s Capital A/c

 

 

 

3,400

 

(Profit on revaluation transferred to Partners’ Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

B’s Capital A/c

Dr.

 

10,000

 

 

C ’s Capital A/c

Dr.

 

40,000

 

 

     To A’s Capital A/c

 

 

 

50,000

 

(Goodwill adjusted)

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Land & Building A/c

17,500

Machinery A/c

   12,000

Provision for Doubtful Debts A/c

2,500

Motor Cycle  A/c

20,000

Bank A/c (Remuneration)

5,000

Creditors  A/c

10,000

Profit transferred to:

 

 

 

A                                                         

8,500

 

 

 

B                                                         

5,100

 

 

 

C                                                         

3,400

17,000

 

 

 

42,000

 

42,000

 

 

 

 

             

 

Working Notes:

WN1: Calculation of sacrifice or gain

A:B:C=5:3:2(Old Ratio)A:B:C=1:1:1(New Ratio)Sacrificing (or Gaining Ratio) = Old Ratio - New RatioA's share=51013=151030=530(Sacrifice)B's share=31013=91030=130(Gain)C's share=21013=61030=430(Gain)


WN2: Valuation of Goodwill

Goodwill=Average Profit×No. of years' Purchase               =1,50,000×2=Rs 3,00,000

WN3: Adjustment of Goodwill
Amount credited to A's Capital A/c=3,00,000×530=Rs 50,000Amount debited to B's Capital A/c=3,00,000×130=Rs 10,000Amount debited to C's Capital A/c=3,00,000×430=Rs 40,000


 



Page No 3.37:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

A’s Capital A/c (30,000×110=3,000)

Dr.

 

3,000

 

 

    To B’s Capital A/c

 

 

 

3,000

 

(Adjustment entry made for change in ratio)

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Calculation of Sacrifice or Gain

A:B:C=2:2:1(Old Ratio)A:B:C=5:3:2(New Ratio)Sacrificing (or Gaining Ratio) = Old Ratio - New RatioA's share=25510=4510=110(Gain)B's share=25310=4310=110(Sacrifice)C's share=15210=2210=0


WN2: Calculation of Profit or Loss on Revaluation

Revaluation A/c

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Computers A/c

25,000

Machinery A/c

50,000

Outstanding expenses A/c

10,000

Creditors A/c

15,000

Profit on Revaluation

30,000

 

 

 

 

 

 

 

65,000

 

65,000

 

 

 

 

Page No 3.37:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

X’s Capital A/c  

Dr.

 

15,000

 

 

Y’s Capital A/c

Dr.

 

5,000

 

 

To Z’s Capital A/c

 

 

20,000

 

(Adjustment made for Goodwill, General Reserve and Profit and Loss Account on change in profit sharing ratio)

 

 

 

 

 

 

 

 

 

Balance Sheet
(after change in Profit Sharing Ratio)

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital A/c s:

 

Sunday Assets

7,00,000

X

1,95,000

 

 

 

Y

1,45,000

 

 

 

Z

1,40,000

4,80,000

 

 

General Reserve

65,000

 

 

Profit and Loss A/c

25,000

 

 

Creditors

1,30,000

   
  7,00,000   7,00,000

 

 

 

 

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 7 : 5 : 4

New Ratio (X, Y and Z) = 3 : 2 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Adjustment of General Reserve, Profit and Loss Account and Goodwill

Total Amount for Adjustment = General Reserve + Profit and Loss Account + Goodwill

= 65,000 + 25,000 + 1,50,000 = Rs 2,40,000

WN 3

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Z's Capital A/c

15,000

5,000

Balance b/d

2,10,000

1,50,000

1,20,000

 

 

 

 

X's Capital A/c

15,000

 

 

 

 

Y's Capital A/c

5,000

Balance c/d

1,95,000

1,45,000

1,40,000

 

 

 

 

 

2,10,000

1,50,000

1,40,000

 

2,10,000

1,50,000

1,40,000

 

 

 

 

 

 

 

 

Page No 3.37:

Question 27:

A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1 . Their Balance Sheet as on 31st March, 2015 was as follows:
 

 

 

 

Liabilities

Assets

 Creditors 50,000 Land 50,000
Bills Payable 20,000 Building 50,000
General Reserve 30,000 Plant 1,00,000
Capital A/cs:   Stock 40,000
A 1,00,000   Debtors 30,000
B 50,000   Bank 5,000

    C 

25,000

1,75,000

 

 

 

2,75,000

 

2,75,000

 

 

 

 

   

 

From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued  at ₹ 1,50,000.
(ii) Land will be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii)  Creditors of ₹ 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account , Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

Answer:

Revaluation Account

Dr.

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Building A/c

3,000

Land A/c

30,000

Revaluation Profit

 

Creditors A/c

6,000

A

16,500

 

 

 

B

11,000

 

 

 

C

5,500

33,000

 

 

 

 

 

 

 

36,000

 

36,000

 

 

 

 

 

Partners’ Capital Account

Dr.

Cr.

Particulars

A

B

C

Particulars

A

B

C

A’s Capital A/c

 

 

25,000

Balance b/d

1,00,000

50,000

25,000

Balance c/d

1,56,500

71,000

10,500

R/v Profit

16,500

11,000

5,500

 

 

 

 

General Reserve

15,000

10,000

5,000

 

 

 

 

C’s Capital A/c

25,000

 

 

 

1,56,500

71,000

35,500

 

1,56,500

71,000

35,500

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2015 

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital A/c

 

Land

50,000

 

A

1,56,500

 

Add: Increase

30,000

80,000

B

71,000

 

Building

50,000

 

C

10,500

2,38,000

Less: Dep.

3,000

47,000

 

 

Plant

1,00,000

Creditors

50,000

 

Bank

5,000

Less: Written-off

6,000

44,000

Stock

40,000

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