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Page No 5.100:

Question 73:

A , B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1 . Their Balance Sheet as at 31st March, 2018  stood as follows :
​

Liabilities

 

₹

Assets

₹

Sundry Creditors

2,60,000

Cash in Hand

42,500

General Reserve

1,20,000

Cash at Bank

2,14,500

Capital A/cs:

  Debtors 1,63,000
  A

2,00,000

  Stock 17,500
  B 1,20,000   Investments 1,32,500
  C 

80,000

4,00,000

Building 2,10,000
 

7,80,000

 

7,80,000

       
   
B died on 30th June , 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest thereon @ 10% per annum.
(b) His proportionate share of General Reserve.
(c) His share of profits  fro the intervening period will be based on the sales during that period. Sales from 1st April, 2018 to 30th June , 2018 were as â‚¹ 12,00,000. The rate of profit during        past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20% . The profit of the previous three years were: 1st Year: â‚¹         82,000; 2nd year: â‚¹ 90,000; 3rd year â‚¹ 98,000.
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors'  Account.

Answer:

B’s Capital Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

B’s Executor A/c

3,47,000

Balance b/d

1,20,000

 

 

Interest on Capital A/c

3,000

 

 

General Reserve

40,000

 

 

Profit & Loss Suspense A/c

40,000

 

 

Goodwill A/c

1,44,000

 

3,47,000

 

3,47,000

 

 

 

 

           

 

B’s Executor Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bank A/c

3,47,000

B’s Capital A/c

3,47,000

 

3,47,000

 

3,47,000

 

 

 

 

           

Working Notes:

WN 1: Calculation of Interest on Capital

WN 2: Calculation of Profit Share up-to-death

WN 3: Calculation of share of goodwill

Page No 5.100:

Question 74:

Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of â‚¹ 1,25,000 in Chetan's Capital Account in the beginning of the year. In the event of death of any partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid â‚¹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of â‚¹ 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were â‚¹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were â‚¹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was â‚¹ 2,00,000.
Prepare Chetan's Capital Account to be presented to his executor.

Answer:

Chetan’s Capital A/c
Dr.
Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Chetan’s Executor’s A/c
1,79,750
Capital
1,25,000
 
 
Interest on Capital
(for 6 months)
3,750
 
 
Babita’s Share Capital A/c*
16,000
 
 
David’s Share Capital A/c*
8,000
 
 
Share of Reserve
12,000
 
 
P & L Suspense A/c**
15,000
 
 
 
 
 
1,79,750
 
1,79,750
 
 
 
 

Working Note: *
 
 

**Sales in the year 2011-12 = 4,00,000

Profit for year 2011-12 = 2,00,000 = 50% of Sales.

Therefore, Profit for the Period Apr 01 to 30th Sep = 50% of Sales of the same period

Share of Profit to be divided = 50% of Rs 1,20,000 = Rs 60,000

Chetan’s Share of Profit = 1/4th of Rs 60,000 = Rs 15,000

Page No 5.100:

Question 75:

Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:
​

Liabilities

 

₹

Assets

₹

Creditors

10,000

Plant and Machinery

40,000

General Reserve

30,000

Furniture

15,000

Capital A/cs:

  Investments 20,000
Sunny

30,000

  Debtors 20,000
Honey 30,000   Stock 20,000
Rupesh

20,000

80,000

  25,000
 

1,20,000

 

1,20,000

       
   
Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was â‚¹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.

Answer:

Honey’s Capital A/c

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Executor’s A/c

81,350

Balance b/d

30,000

 

 

Interest on Capital

1,350

 

 

Profit and Loss Suspense A/c

40,000

 

 

General Reserve

10,000

 

81,350

 

81,350

 

 

 

 

 

Working Notes:

WN1 Calculation of Interest on Honey’s Capital

WN2 Calculation of Honey’s share in profits

WN3 Calculation of Honey’s Share in General Reserve



Page No 5.101:

Question 76:

​​R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2018, their Balance Sheet stood as:

Liabilities

 

₹

Assets

₹

Sundry Creditors

40,000

Goodwill

25,000

Bills Payable

15,000

Leasehold

1,00,000

Workmen Compensation Reserve

30,000

Patents 30,000

Capital A/cs:

  Machinery 1,50,000
   R 1,50,000   Stock 50,000
   S

1,25,000

  Debtors 40,000
   T

75,000

3,50,000

Cash at Bank 40,000
 

4,35,000

 

4,35,000

       
   
T died on 1st August, 2018. It was agreed that:
(a) Goodwill be valued at 212 years' purchase of average of last 4 years' profits which were:
    2014-15: â‚¹ 65,000;  2015-16: â‚¹ 60,000; 2016-17: â‚¹ 80,000 and 2017-18: â‚¹ 75,000.
(b) Machinery be valued at â‚¹ 1,40,000; Patents be valued at ₹ 40,000; Leasehold be valued at â‚¹ 1,25,000 on 1st August, 2018.
(c) For the purpose of calculating T's share in the profits of 2018-19, the profits in 2018-19 should be taken to have accrued on the same scale as in 2017-18.
(d) A sum of â‚¹ 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T's Executors' Account. 

Answer:

Journal
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Revaluation A/c
Dr.
 
10,000
 
To Machinery A/c
 
 
10,000
(Decrease in value of Machinery transferred to Revaluation Account)
 
 
 
 
 
 
 
Patents A/c
Dr.
 
10,000
 
Leasehold A/c
Dr.
 
25,000
 
To Revaluation A/c
 
 
35,000
(Increase in value Patents and Leasehold transferred to Revaluation Account)
 
 
 
 
 
 
 
 
Revaluation A/c
Dr.
 
25,000
 
To R’s Capital A/c
 
 
12,500
To S’s Capital A/c
 
 
7,500
To T’s Capital A/c
 
 
5,000
(Revaluation profit distributed among partners in their old ratio)
 
 
 
 
 
 
 
R’ Capital A/c
Dr.
 
12,500
 
S’s Capital A/c
Dr.
 
7,500
 
T’s Capital A/c
Dr.
 
5,000
 
To Goodwill A/c
 
 
25,000
(Goodwill written off among partners in their old ratio)
 
 
 
 
 
 
 
R’s Capital A/c
Dr.
 
21,875
 
S’s Capital A/c
Dr.
 
13,125
 
To T’s Capital A/c
 
 
35,000
(T’s share of goodwill adjusted)
 
 
 
 
 
 
 
Profit and Loss Suspense A/c
Dr.
 
5,000
 
  To T’s Capital A/c
 
 
5,000
(T’s share of profit transferred to his capital account)
 
 
 
 
 
 
 
Workmen’s Compensation Reserve A/c
Dr.
 
30,000
 
To R’s Capital A/c
 
 
15,000
To S’s Capital A/c
 
 
9,000
To T’s Capital A/c
 
 
6,000
(Workmen’s Compensation Reserve distributed among partners in their old ratio )
 
 
 
 
 
 
 
T’s Capital A/c
Dr.
 
1,21,000
 
To T’s Executors A/c
 
 
1,21,000
(Amount due to T after all adjustments transferred to his Executor’s Account)
 
 
 
 
 
 
 
T’s Executor’s A/c
Dr.
 
21,000
 
To Bank A/c
 
 
21,000
(Amount paid to T’s Executor)
 
 
 
 
 
 
 
 
T’s Executor’s Account
Dr.
 
Cr.
Date
Particulars
Amount
Rs
Date
Particulars
Amount
Rs
2018
 
 
2018
 
 
Aug. 01
Cash A/c
21,000
Aug. 01
T’s Capital A/c
1,21,000
2013     2013    
Jan. 31
Cash A/c (25,000 + 5,000)
30,000
Jan. 31
Interest (1,00,000 ×10% for 6 months)
5,000
Mar. 31
Balance c/d
76,250
Mar. 31
Interest (75,000 ×10% for 2 months)
1,250
 
 
1,27,250
 
 
1,27,250
2019
 
 
2019
 
 
Aug. 01
Cash A/c (25,000 + 1,250 + 2,500)
28,750
Apr. 01
Balance b/d
76,250
2014
 
 
Aug. 01
Interest (75,000 × 10% for 4 months)
2,500
Jan. 31 Cash A/c (25,000 + 2,500) 27,500 2014    
Mar. 31
Balance c/d
25,417
Jan. 31
Interest (50,000 × 10% for 6 months)
2,500
 
 
 
Mar. 31
Interest (25,000 × 10% for 2 months)
417
 
 
81,667
 
 
81,667
2020
 
 
2020
 
 
Aug. 01
Cash A/c (25,000 + 417 + 833)
26,250
Apr. 01
Balance b/d
25,417
 
 
 
Aug. 01
Interest (25,000 × 10% for 4 months)
833
 
 
26,250
 
 
26,250
 
 
 
 
 
 

Working Notes:

WN 1 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase



∴ Goodwill = Average Profit × Number of Years’ Purchase
                    = 70,000 × 2.5 = Rs 1,75,000

WN 2 Adjustment of Goodwill

Old Ratio (R, S and T) = 5 : 3 : 2

T died.

∴ New Ratio (R and S) = 5 : 3 and

Gaining Ratio = 5 : 3

T’s Share in Goodwill =

This share of goodwill is to be distributed between R and S in their gaining ratio (i.e. 5 : 3).


WN 3 Calculation of T’s Share of Profit

Profit for 2017-18 = Rs 75,000

T's Share of Profit for 2018-19 =75,000×210×412=Rs.5,000

WN 4
 
Revaluation Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Machinery
10,000
Patents
10,000
Profit transferred to:
 
Leasehold
25,000
R’s Capital A/c
12,500
 
 
 
S’s Capital A/c
7,500
 
 
 
T’s Capital A/c
5,000
25,000
 
 
 
35,000
 
35,000
 
 
 
 

WN 5
T’s Capital Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Goodwill
5,000
Balance b/d
75,000
T’s Executor’s A/c
1,21,000
Workmen’s Compensation Reserve
6,000
 
 
Profit and Loss Suspense A/c
5,000
 
 
R’s Capital A/c
21,875
 
 
S’s Capital A/c
13,125
 
 
Revaluation A/c (Profit)
5,000
 
1,26,000
 
1,26,000
 
 
 
 

Page No 5.101:

Question 77:

Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:
 

Liabilities

 

₹

Assets

₹

Trade Creditors

40,000

Building

2,00,000

General Reserve

45,000

Plant and Machinery

80,000

Capital A/cs:

  Stock 35,000
 Akhil

1,95,000

  Debtors 80,000
 Nikhil 1,20,000   Cash at Bank 85,000
 Sunil

80,000

3,95,000

   
 

4,80,000

 

4,80,000

       
   
Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
(a) Balance of Partners' Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner's capital @ 6% p.a.
(e) â‚¹ 50,000 to be paid to deceased's executor immediately and the balance to remain in his Loan Account.
Profits and Losses for the preceding years were: 2014-15 − ₹ 80,000 Profit; 2015-16 − ₹ 1,00,000 Loss; 2016-17 − ₹ 1,20,000 Profit; 2017-18 − ₹ 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil's Capital Account and Sunil's Executor Account. 

Answer:

Journal
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
General Reserve A/c
Dr.
 
45,000
 
To Akhil’s Capital A/c
 
 
15,000
To Nikhil’s Capital A/c
 
 
15,000
To Sunil’s Capital A/c
 
 
15,000
(General Reserve distributed among partners in their old ratio)
 
 
 
 
 
 
 
Akhil’s Capital A/c
Dr.
 
35,000
 
Nikhil’s Capital A/c
Dr.
 
35,000
 
To Sunil’s Capital A/c
 
 
70,000
(Sunil’s share of goodwill adjusted)
 
 
 
 
 
 
 
Interest on Capital A/c
Dr.
 
1,600
 
To Sunil’s Capital A/c
 
 
1,600
(Interest allowed on Sunil’s Capital)
 
 
 
 
 
 
 
Profit and Loss Suspense A/c
Dr.
 
20,000
 
To Sunil’s Capital A/c
 
 
20,000
(Sunil’s profit share transferred to his capital account)
 
 
 
 
 
 
 
Sunil’s Capital A/c
Dr.
 
1,86,600
 
To Sunil’s Executor’s A/c
 
 
1,86,600
(Amount due to Sunil after all adjustments transferred to his Executor’s Account)
 
 
 
 
 
 
 
Sunil’s Executor’s A/c
Dr.
 
50,000
 
To Bank A/c
 
 
50,000
(Amount paid to Sunil’s Executor)
 
 
 
 
 
 
 
 
Sunil’s Capital Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
Balance b/d
80,000
 
 
Interest on Capital A/c
1,600
 
 
General Reserve
15,000
 
 
Profit and Loss Suspense A/c
20,000
 
 
Akhil’s Capital A/c (Goodwill)
35,000
Sunil’s Executor’s A/c
1,86,600
Nikhil’s Capital A/c (Goodwill)
35,000
 
1,86,600
 
1,86,600
 
 
 
 
 
Sunil’s Executor’s Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Bank A/c
50,000
Sunil’s Capital A/c
1,86,600
Balance c/d
1,36,600
 
 
 
1,86,600
 
1,86,600
 
 
 
 

Working Notes:

WN 1 Calculation of Sunil’s Share of Profit

Profit for 2017-18 = Rs 1,80,000



WN 2 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase



∴ Goodwill = Average Profit × Number of Years’ Purchase

                   = 70,000 × 3 = Rs 2,10,000

WN 3 Adjustment of Goodwill

Old Ratio = 1 : 1 : 1

Sunil died.

∴ New Ratio = 1 : 1 and

Gaining Ratio = 1 : 1

Sunil’s Share in Goodwill =

This share of goodwill is to be distributed between Akhil and Nikhil in their gaining ratio (i.e. 1 : 1).



WN 4 Calculation of Interest on Sunil’s Capital

Sunil’s Capital Balance = Rs 80,000

∴ Interest on Capital (for 4 months)



Page No 5.102:

Question 78:

B, C and D were partners in a firm sharing profits in the ratio of 5 :3 : 2. On 31st December, 2008, their Balance Sheet was as follows:
 

Liabilities

Amount

(₹)

Assets

Amount
(₹)

Creditors

43,000

Cash 

10,200

Bills Payable

17,000

Stock

24,500

General Reserve

70,000

Debtors 27,300

Capital A/cs:

  Land and Building 1,40,000
 B  40,000   Profit and Loss A/c 70,000
 C

50,000

     
 D

52,000

1,42,000

   
 

2,72,000

 

2,72,000

       
   
B died on 31st March, 2009. The Partnership Deed provided for the following on the death of a partner:
(a) Goodwill of the firm was to be valued at 3 years' purchase of the average profit of last 5 years. The  profits for the years ended 31st December, 2007, 31st December, 2006, 31st December, 2005, and 31st December, 2004 were â‚¹ 70,000; â‚¹ 60,000; â‚¹ 50,000 and â‚¹ 40,000 respectively. 
(b) B's share of profit or loss till the date of his death was to be calculated on the basis of the profit or loss for the year ended 31st December, 2008.
You are required to calculate the following:
(i) Goodwill of the firm and B's share of goodwill at the time of his death.
(ii) B's share in the profit or loss of the firm till the date of his death.
(iii) Prepare B's Capital Account at the time of his death to be presented to his Executors.

Answer:

(i) Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase



∴ Goodwill = Average Profit × Number of Years’ Purchase

= 30,000 × 3 = Rs 90,000

Old Ratio (B, C and D) = 5 : 3 : 2

B Died.

New Ratio (C and D) = 3 : 2

B’s Share in Goodwill =

This share of goodwill is to be distributed between C and D in their gaining ratio (i.e. 3 : 2).



(ii) Calculation of B’s Share of Profit or Loss

Loss for the Year (2008) = Rs 70,000



(iii)

B’s Capital Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Profit and Loss A/c
35,000
Balance b/d
40,000
Profit and Loss Suspense A/c
8,750
General Reserve
35,000
 
 
C’s Capital A/c (Goodwill)
27,000
B’s Executor’s A/c
76,250
D’s Capital A/c (Goodwill)
18,000
 
1,20,000
 
1,20,000
 
 
 
 

Page No 5.102:

Question 79:

The Balance Sheet of X, Y and Z as at 31st March, 2018 was:
 

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Bills Payable

2,000

Cash at Bank

5,800

Employees' Provident Fund

5,000

Bills Receivable

800

Workmen Compensation Reserve

6,000

Stock 9,000
General Reserve 6,000 Sundry Debtors 16,000
Loans 7,100 Furniture 2,000

Capital A/cs:

  Plant and Machinery 6,500
X 22,750   Building 30,000
Y

15,250

  Advertising Suspense 6,000
Z

12,000

50,000

   
 

76,100

 

76,100

       
   
The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 2017-18: â‚¹ 24,000; 2016-17: â‚¹ 16,000; 2015-16: â‚¹ 20,000 and 2014-15: â‚¹ 10,000 and 2013-14: ₹ 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock ₹ 10,000; Debtors â‚¹ 15,000; Furniture â‚¹ 1,500; Plant and Machinery â‚¹ 5,000; Building â‚¹ 35,000. A Bill Receivable for â‚¹ 600 was found worthless.
(d) A Sum of â‚¹ 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.

Answer:

Journal
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Workmen’s Compensation Reserve
Dr.
 
6,000
 
To X’s Capital A/c
 
 
3,000
To Y’s Capital A/c
 
 
2,000
To Z’s Capital A/c
 
 
1,000
(Workmen’s Compesation Reserve distributed among partners in their old ratio)
 
 
 
 
 
 
 
General Reserve A/c
Dr.
 
6,000
 
To X’s Capital A/c
 
 
3,000
To Y’s Capital A/c
 
 
2,000
To Z’s Capital A/c
 
 
1,000
(General Reserve distributed among partners in their old ratio)
 
 
 
 
 
 
 
X’s Capital A/c
Dr.
 
3,000
 
Y’s Capital A/c
Dr.
 
2,000
 
Z’s Capital A/c
Dr.
 
1,000
 
To Advertisement Suspense A/c
 
 
6,000
(Advertisement suspense written off among partners in their old ratio)
 
 
 
 
 
 
 
X’s Capital A/c
Dr.
 
4,500
 
Y’s Capital A/c
Dr.
 
3,000
 
To Z’s Capital A/c
 
 
7,500
(Z’s share of goodwill adjusted)
 
 
 
 
 
 
 
Revaluation A/c
Dr.
 
3,600
 
  To Sundry debtors A/c
Dr.
 
 
1,000
To Furniture A/c
 
 
500
To Plant and Machinery A/c
 
 
1,500
To Bills Receivable A/c
 
 
600
(Decrease in value of Assets transferred to Revaluation Account)
 
 
 
 
 
 
 
Stock A/c
Dr.
 
1,000
 
Building A/c
Dr.
 
5,000
 
To Revaluation A/c
 
 
6,000
(Increase in value of Assets transferred to Revaluation Account)
 
 
 
 
 
 
 
Revaluation A/c
Dr.
 
2,400
 
To X’ Capital A/c
 
 
1,200
To Y’s Capital A/c
 
 
800
To Z’s Capital A/c
 
 
400
(Revaluation profit distributed among partners in their old ratio)
 
 
 
 
 
 
 
Profit and Loss Suspense A/c
Dr.
 
1,333
 
To Z’s Capital A/c
 
 
1,333
(Z’s share of profit transferred his capital account)
 
 
 
 
 
 
 
Z’s Capital A/c
Dr.
 
22,233
 
  To Z’s Executor’s A/c
 
 
22,233
(Amount due to Z transferred to his Executor’s Account)
 
 
 
 
 
 
 
Z’s Executor’s A/c
Dr.
 
12,333
 
To Bank A/c
 
 
12,333
(Amount paid to Z’s Executor)
 
 
 
 
 
 
 
 
Z’s Executor’s Account
Dr.
 
Cr.
Date
Particulars
Amount
Rs
Date
Particulars
Amount
Rs
2018
 
 
2018
 
 
July 31
Bank A/c
12,233
July 31
Z’s Capital A/c
22,233
2019     2019    
Mar. 31
Balance c/d
10,667
Mar. 31
Interest (10,000 × 10% for 8 months)
667
 
 
22,900
 
 
22,900
2019
 
 
2019
 
 
July 31
Bank A/c (5,000 + 667 + 333)
6,000
Apr. 01
Balance b/d
10,667
 
 
 
July 31
Interest (10,000 × 10% for 4 months )
333
2020     2020    
Mar.31
Balance c/d
5,333
Mar. 31
Interest (5,000 × 10% for 8 months)
333
 
 
11,333
 
 
11,333
2020
 
 
2020
 
 
July 31
Bank A/c (5,000 + 333 + 167)
5,500
Apr. 01
Balance b/d
5,333
 
 
 
July 31
Interest (5,000 × 10% for 4months)
167
 
 
5,500
 
 
5,500
 
 
 
 
 
 

Working Notes:

WN1 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase



∴ Goodwill = Average Profit × Number of Years’ Purchase

                   = 15,000 × 3 = Rs 45,000

WN2 Adjustment of Goodwill

Old Ratio = 3 : 2 : 1

Z died.

∴ New Ratio (X and Y) = 3 : 1 and

Gaining Ratio = 3 : 2

Z’s Share in Goodwill =

This share of goodwill is to be distributed between X and Y in their gaining ratio (i.e. 3 : 1).



WN3 Calculation Z’s Share of Profit

Profit for 2017-18 ( Immediate Previous Year) = Rs 24,000

∴ Z’s Profit Share

WN4
 
Revaluation Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Sundry Debtors
1,000
Stock
1,000
Furniture
500
Building
5,000
Plant and Machinery
1,500
 
 
Bills Receivable
600
 
 
Profit transferred to:
 
 
 
X’s Capital A/c
1,200
 
 
 
Y’s Capital A/c
800
 
 
 
Z’s Capital A/c
400
2,400
 
 
 
6,000
 
6,000
 
 
 
 



Page No 5.103:

Question 80:

X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:
 

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors

2,00,000

Building

2,00,000

Employees' Provident Fund

1,50,000

Machinery

3,00,000

General Reserve

36,000

Furniture 1,10,000
Investment Fluctuation Reserve 14,000 Investment (Market value â‚¹ 86,000) 1,00,000

Capital A/cs:

  Debtors 80,000
  X

3,00,000

  Cash at Bank 1,90,000
  Y  2,50,000   Advertisement Suspense  1,20,000
  Z

1,50,000

7,00,000

   
 

11,00,000

 

11,00,000

       
   
X died on 1st October, 2018 and Y and Z decide to share future profits in the ratio of 7 : 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at 212 years' purchase of average of four completed years' profit which were:
Year 2014-15 2015-16 2016-17 2017-18
Profits (₹) 1,70,000 1,80,000 1,90,000 1,80,000

(ii) X's share of profit from the closure of last accounting year till date of death be calculated on the basis of last years' profit.
(iii) Building undervalued by â‚¹ 2,00,000; Machinery overvalued by â‚¹ 1,50,000 and Furniture overvalued by â‚¹ 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net amount payable to X's executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2018.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery

1,50,000

Building

2,00,000

Furniture

46,000

 

 

Provision for Doubtful Debts

4,000

 

 

 

 

 

 

 

2,00,000

 

2,00,000

 

 

 

 

           

X’s Capital  Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Advertisement Suspense A/c

50,000

Balance b/d

3,00,000

X’s Executors A/c

5,05,000

General Reserve

15,000

 

 

Y’s Capital A/c

1,12,500

 

 

Z’s Capital A/c

75,000

 

 

Profit & Loss Suspense

37,500

 

 

Interest on Capital

15,000

 

 

 

 

 

5,55,000

 

5,55,000

 

 

 

 

           

 

X’s Executors  Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bank A/c

2,52,500

X’s Capital A/c

5,05,000

X’s Executors  Loan Account

2,52,500

 

 

 

 

 

 

 

57,000

 

57,000

 

 

 

 

           

Working Notes:

WN1: Calculation of Share in General Reserve

Reserve=36,000×512=Rs 15,000

WN2: Calculation of Interest on Capital

Interest on capital=3,00,000×10×6100×12=Rs 15,000

WN3: Calculation of Profit & Loss Suspense

Profit & Loss Suspense=1,80,000×5×612×12=Rs 37,500

WN4: Calculation of Share in Goodwill

Gaining Ratio = New Ratio - Old RatioY's Gain = 712412=7412=312Z's Gain = 512312=5312=212Goodwill=Average Profit×No. of years' Purchase               =1,80,000×2.5=Rs 4,50,000X's share in Goodwill = 4,50,000×512=Rs 1,87,500, should be contributed by Y & Z in gaining ratio i.e. 3:2



Page No 5.104:

Question 81:

X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z died on 30th June, 2018. The Balance Sheet of the firm as at that 31st March, 2018 is as follows:
 

BALANCE SHEET as at 31st March, 2018
Liabilities Amount
(₹)
Assets Amount
​(₹)
X's Capital A/c 2,40,000  

Machinery

2,40,000
Y's Capital A/c 1,60,000   Furniture 1,50,000

Z's Capital A/c

80,000 4,80,000 Investments 40,000
X's Current A/c 16,000 Stock 64,000
Y's Current A/c 5,000 Sundry Debtors                      50,000
Reserve 60,000 Bills Receivable 22,000
Bills Payable 34,000 Cash at Bank 37,000
Sundry Creditors 40,000 Cash in Hand 22,000
    Z's Current A/c 10,000
       
       
  6,35,000   6,35,000
       
 â€‹
The following decisions were taken by the remaining partners:
(a) A Provision for Doubtful Debts is to be raised at 5% on Debtors.
(b) While Machinery to be decreased by 10%, Furniture and Stock are to be appreciated by 5% and 10% respectively.
(c) Advertising Expenses â‚¹ 4,200 are to be carried forward to the next accounting year and, therefore, it is to be adjusted through the Revaluation Account.
(d) Goodwill of the firm is valued at â‚¹ 60,000.
(e) X and Y are to share profits and losses equally in future.
(f) Profit for the year ended 31st March, 2018 was â‚¹ 8,16,000 and Z's share of profit till the date of death is to be determined on the basis of profit for the year ended 31st March, 2018.
(g) The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current Account balances to the respective Partners' Capital Accounts.
Prepare the Revaluation Account, Partners' Capital Accounts and prepare C's Executors's Account to show that C's Executors were paid in two half-yearly instalments plus interest of 10% p.a. on the
unpaid balance. The first instalment was paid on 31st December, 2018.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery

24,000

Furniture

7,500

Provision for Doubtful Debts

2,500

Stock

6,400

 

 

Prepaid Advertisement Expenses

4,200

 

 

Loss transferred to:

 

 

 

X’s Capital A/c

4,200

 

 

 

Y’s Capital A/c

2,800

 

 

 

Z’s Capital A/c

1,400

8,400

 

26,500

 

26,500

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Current A/c

 

 

10,000

Balance b/d

2,40,000

1,60,000

80,000

Revaluation A/c

4,200

2,800

1,400

Current A/c

16,000

5,000

 

Z ’s Capital A/c

 

10,000

 

Reserve

30,000

20,000

10,000

Z ’s Capital A/c

 

34,000

 

Y ’s Capital A/c

 

 

34,000

Z’s Executors A/c

 

 

1,22,600

Y ’s Capital A/c

 

 

10,000

Balance c/d

2,81,800

1,38,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,86,000

1,85,000

1,34,000

 

2,86,000

1,85,000

1,34,000

 

 

 

 

 

 

 

 

                 

Z's Executor Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2018-19

 

 

 

2018-19

 

 

 

Dec. 31

Bank A/c (61,300 + 6,130)

 

67,430

Jun. 30

Z’s Capital A/c

 

1,22,600

Mar. 31

Balance c/d

 

62,832.5

Dec. 31

Interest (1,22,600×10100×612)

 

6,130

 

 

 

 

Mar.31

Interest (61,300×10100×312)

 

1,532.5

 

 

 

1,30,262.5

 

 

 

1,30,262.5

 

 

 

 

 

 

 

 

2019-20

 

 

 

2019-20

 

 

 

Jun. 30

Bank  (61,300 + 3,065)

 

64,365

April 01

Balance b/d

 

62,832.5

 

 

 

 

Jun. 30

Interest (61,300×10100×312)

 

1,532.5

 

 

 

64,365

 

 

 

64,365

 

 

 

 

 

 

 

 

                 

 

Working Notes:

WN1: Calculation of Profit & Loss Suspense

Profit & loss Suspense=8,16,000×1×36×12=Rs 34,000

WN2: Calculation of Gaining Ratio and Share of Goodwill

Gaining Ratio = New Ratio - Old RatioX's gain=1236=0Y's gain=1226=16X:Y=0:1Z's share of goodwill=60,000×16=Rs 10,000 should be given by Y

Note:
Z’s share of profit is adjusted through Y’s capital A/c because there is change in profit sharing ratio of remaining partners.

 

Page No 5.104:

Question 82:

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2018 was as follows:

 
Liabilities Amount
(₹)
Assets Amount
(₹)
Sundry Creditors 18,000 Goodwill 12,000
Investments Fluctuation Reserve 7,000 Patents 52,000
Workmen Compensation Reserve 7,000 Machinery 62,400
Capital A/cs:     Investment 6,000
 X 1,35,000   Stock 20,000
 Y 95,000   Sundry Debtors 24,000  

 Z

74,000 3,04,000 Less: Provision for Doubtful Debts 4,000 20,000
    Loan to Z 1,000
    Cash at Bank 600
    Profit and Loss A/c 1,50,000
    Z's Drawings 12,000
  3,36,000   3,36,000
 
Z died on 1st April, 2018, X and Y decide to share future profits and losses in ratio of 3 : 5. It was agreed that:
(i) Goodwill of the firm be valued 212 years' purchase of average of four completed years' profits which were: 2014-15₹ 1,00,000; 2015-16₹ 80,000; 2016-17₹ 82,000.
(ii) Stock is undervalued by â‚¹ 14,000 and machinery is overvalued by â‚¹ 13,600.
(iii) All debtors are good. A debtor whose dues of â‚¹ 400 were written off as bad debts paid 50% in full settlement.
(iv) Out of the amount of insurance premium debited to Profit and Loss Account, â‚¹ 2,200 be carried forward as prepaid insurance premium.
(v) ₹ 1,000 included in Sundry Creditors is not likely to arise.
(vi) A claim of â‚¹ 1,000 on account of Workmen Compensation to be provided for.
(vii) Investment be sold for â‚¹ 8,200 and a sum of â‚¹ 11,200 be paid to executors of Z immediately. The balance to be paid in four equal half-yearly instalments together with interest @ 8% p.a. at half year rest.
Show Revaluation Account, Capital Accounts of Partners and the Balance Sheet of the new firm.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery

13,600

Creditors

     1,000

Profit transferred to:

 

Stock

14,000

X                                                

5,000

 

Provision for Doubtful Debts

4,000

Y                                                  

3,000

 

Investment

2,200

Z                                                 

2,000

10,000

Bad Debts Recovered

200

 

 

Prepaid Insurance

2,200

 

23,600

 

23,600

 

 

 

 

             

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Goodwill

6,000

3,600

2,400

Balance b/d

1,35,000

95,000

74,000

Drawings

 

 

12,000

Revaluation

5,000

3,000

2,000

Profit & Loss A/c

75,000

45,000

30,000

IFR

3,500

2,100

1,400

X’s Capital A/c

 

8,750

 

Y’s Capital A/c

8,750

 

14,000

Z ’s Capital A/c

 

14,000

 

WCR

3,000

1,800

1,200

Loan to Z

 

 

1,000

 

 

 

 

Z’s Executors A/c

 

 

47,200

 

 

 

 

Balance c/d

74,250

30,550

 

 

 

 

 

 

1,55,250

1,01,900

92,600

 

1,55,250

1,01,900

92,600

 

 

 

 

 

 

 

 

                   

Z’s Executors  Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bank A/c

11,200

Z’s Capital A/c

47,200

Z’s Executors  Loan Account

36,000

 

 

 

 

 

 

 

57,000

 

57,000

 

 

 

 

           

Balance sheet 

as on April 01, 2018 after Z’s death

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

17,000

Patents

52,000

Z’s Executors Loan A/c

36,000

Machinery 

48,800

Workmen Compensation Claim

1,000

Stock

34,000

Capital A/cs:

 

Debtors

24,000

X

74,250

 

Prepaid Insurance

2,200

Y

30,550

1,04,800

 

 

Bank Overdraft (600 + 8,200-11,200 + 200)

2,200

 

 

 

1,61,000

 

1,61,000

 

 

 

 

 

Working Notes:

WN1: Calculation of Gaining Ratio and Share of Goodwill

Gaining Ratio = New Ratio - Old RatioX's gain=38510=540 (Sacrifice)Y's gain=58310=1340Z's share of goodwill=70,000×210=Rs 14,000 X's share of goodwill=70,000×540=Rs 8,750

WN2: Calculation of Goodwill

Goodwill=Average Profit×No. of years' Purchase               =28,000×2.5=Rs 70,000Average Profit=Total Profits of past years givenNumber of years                        =1,00,000+80,000+82,0001,50,0004=Rs 28,000



Page No 5.105:

Question 83:

X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:
​

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Trade Creditors

1,20,000

Cash at Bank

1,80,000

Bills Payable

80,000

Stock

1,40,000

General Reserve

60,000

Sundry Debtors 80,000

Capital A/cs:

  Building 3,00,000
  X

7,00,000

  Advance to Y 7,00,000
  Y 7,00,000   Profit and Loss A/c 3,20,000
  Z

60,000

14,60,000

   
 

17,20,000

 

17,20,000

       
   
Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were â‚¹ 3,20,000 (Loss); â‚¹ 1,00,000; â‚¹ 1,60,000; â‚¹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors. 

Answer:

Y’s Capital  Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit & Loss A/c

1,28,000

Balance b/d

7,00,000

Profit & Loss Suspense (Share of Loss)

32,000

General Reserve

24,000

Advance to Y
 

7,00,000

X’s Capital A/c
Z ’s Capital A/c

64,000
32,000

 

 

Y’s Executors A/c

40,000

 

 

 

 

 

8,20,000

 

8,20,000

 

 

 

 

           

 

Working Notes:

WN1: Calculation of Share in General Reserve

Reserve=60,000×25=Rs 24,000

WN2: Calculation of Share in Goodwill

Goodwill=Average Profit×No. of years' Purchase               =1,20,000×2=Rs 2,40,000Y's share in Goodwill=2,40,000×25=Rs 96,000, should be contributed by X & Z in 2:1Average Profit=Total Profits of past years givenNumber of years                        =1,00,000+1,60,000+2,20,000+4,40,0003,20,0005=Rs 1,20,000

WN3: Calculation of Profit & Loss Suspense

Profit & loss Suspense (Loss)=3,20,000×2×35×12=Rs 32,000

 



Page No 5.80:

Question 1:

A, B and C were partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new ratio of the remaining partners if C retires.

Answer:

Old Ratio (A, B and C) = or 5 : 4 : 1

As we can see, no information is given as to how A and B are acquiring C's profit share after his retirement, so the new profit sharing ratio between A and B is calculated just by crossing out the C’s share. That is, the new ratio becomes 5 : 4.

∴ New Profit Ratio (A and B) = 5 : 4

Page No 5.80:

Question 2:

Ram, Mohan and Sohan were partners sharing profits in the ratio of 1/5, 1/3 and 7/15 respectively. Sohan retires and his share was taken by Ram and Mohan in the ratio of 3:2. Find out the new ratio.

Answer:

Old Ratio (Ram, Mohan and Sohan) = or 3 : 5 : 7

Sohan’s Profit Share =

Ram and Mohan decided to take his share in the ratio of 3 : 2

New Profit Share = Old Profit Share  +  Share taken from Sohan

∴ New Profit Ratio (Ram and Mohan) = 36 : 39 or 12 : 13

Page No 5.80:

Question 3:

From the following particulars, calculate new profit-sharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5 : 5 : 4. Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5 : 4 : 1. P retires from the firm.

Answer:

(a)

Old Ratio (Shiv, Mohan and Hari) = 5 : 5 : 4

Mohan’s Profit Share =

His share is divided between Shiv and Hari equally i.e. in the ratio of 1: 1

New Profit Share = Old Profit Share  +  Share taken from Mohan

∴ New Profit Ratio (Shiv and Hari) = 15 : 13

(b)

Old Ratio (P, Q and R) = 5 : 4 : 1

P’s Profit Share =

As we can see, no information is given as to how Q and R are acquiring P's profit share after his retirement, so the new profit sharing ratio between Q and R is calculated just by crossing out the P’s share. That is, the new ratio becomes 4 : 1

∴New Profit Ratio (Q and R) = 4 : 1

Page No 5.80:

Question 4:

Sita, Geeta and Meeta were partners in a firm sharing profits in the ratio of 7:6:7. Geeta retired and her share was divided equally between Sita and Meeta. Calculate the new profit-sharing ratio of Sita and Meeta.

Answer:

Old Ratio (Sita, Geeta and Meeta) = 7 : 6 : 7

Geeta’s Profit Share =

Her share is divided between Sita and Meeta equally i.e. in the ratio of 1: 1

New Profit Share = Old Profit Share  +  Share taken from Geeta

∴ New Profit Ratio (Sita and Meeta) = 20 : 20 or 1 : 1

Page No 5.80:

Question 5:

R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the business and his share is taken by R and S in the ratio of 1 : 2. Calculate the new profit-sharing ratio.

Answer:

Old Ratio (R, S and M) = 2 : 2 : 1

M retires from the firm.

His profit share = 15

M’s share taken by R and S in ratio of 1 : 2

Share taken by R: 15×13=115Share taken by S: 15×23=215

New Ratio = Old Ratio + Share acquired from M

R's New Share: 25+115=6+115=715S's New Share: 25+215=6+215=815

New Profit Ratio (R and S) = 7 : 8

Page No 5.80:

Question 6:

A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. A retires, assuming B and C will share profits in the ratio of 2 : 1. Determine the gaining ratio.

Answer:

Old Ratio (A, B and C) = 4 : 3 : 2

New Ratio (B and C) = 2 : 1

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 3 : 1

Page No 5.80:

Question 7:

Kangli, Mangli and Sanvali are partners sharing profits in the ratio of 4:3:2 . Kangli retires . Assuming Mangli and Sanvali will share profits in the  future in the ratio of 5:3, determine the gaining ratio.

Answer:

Old Ratio (Kangli, Mangli and Sanvali) = 4 : 3 : 2

New Ratio (Mangli and Sanvali) = 5 : 3

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 21 : 11

Page No 5.80:

Question 8:

X, Y and Z are partners sharing profits in the ratio of 1/2, 3/10, and 1/5. Calculate the gaining ratio of remaining partners when Y retires from the firm.

Answer:

Calculation of Gaining Ratio

X:Y:ZOld Ratio=12:310:15=5:3:210

New Ratio after Y's retirement = 5 : 2

Gaining Share = New Share – Old Share

X's Gain=57-510=1570Z's Gain=27-210=670

Gaining Ratio = 15 : 6 or 5 : 2

Page No 5.80:

Question 9:

(a) W, X, Y and Z are partners sharing profits and losses in the ratio of 1/3, 1/6, 1/3 and 1/6 respectively. Y retires and W, X and Z decide to share the profits and losses equally in future.
Calculate gaining ratio.
(b) A, B and are partners sharing profits and losses in the ratio of 4 : 3 : 2. C retires from the business. A is acquiring 4/9 of C's share and balance is acquired by B. Calculate the new profit-sharing ratio and gaining ratio.

Answer:

(a)

Old Ratio (W, X, Y and Z) = or 2 : 1 : 2 : 1

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

Gaining Ratio = New Ratio − Old Ratio

∴Gaining Ratio = 0 : 1 : 1

(b)

Old Ratio (A, B and C) = 4 : 3 : 2

C’s Profit Share =

A acquires 4/9 of C’s Share and remaining share is acquired by B.

New Profit Share = Old Profit Share +  Share acquired from C

∴ New Profit Ratio (A and B) = 44 : 37

Gaining Ratio = New Ratio − Old Ratio

∴Gaining Ratio = 8 : 10 or 4 : 5



Page No 5.81:

Question 10:

Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3 : 2. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.

Answer:

Kumar's share=310acquired by Lakshya and Manoj in 3:2Share acquired by Lakshya=310×35=950Share acquired by Manoj=310×25=650Lakshya's New Share=210+950=1950Manoj's New Share=110+650=1150Naresh's share (as retained)=410 or 2050New Profit Sharing Ratio=19:11:20

Gaining Ratio = 3:2 (as given in the question)

Page No 5.81:

Question 11:

A, B, C  and D  were partners in a firm sharing profits in 5:3:2:2 ratio. B and C retired from the firm . B's share was acquired by D and C's share was acquired by A . Calculate new profit-sharing ratio of A and D .

Answer:

Old Ratio (A, B, C and D) = 5 : 3 : 2 : 2

B’s Profit Share =

C’s Profit Share =

B’s Share was acquired by D and C’s share was acquired by A.

∴ D’s New Share = D’s Old share + Share of B

A’s New Share = A’s Old Share + Share of C

∴ New Profit Ratio (A and D) = 7 : 5

Page No 5.81:

Question 12:

A, B, and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profit-sharing ratio.

Answer:

Old Ratio (A, B and C) = 8 : 4 : 3

B retires from the firm.

His profit share = 415

B’s share taken by A and C in ratio of 1 : 1

Share taken by A: 415×12=215Share taken by C: 415×12=215

New Ratio = Old Ratio + Share acquired from B

A's New Share: 815+215=1015=23C's New Share: 315+215=515=13

 New Profit Ratio (A and C) = 2 : 1

Page No 5.81:

Question 13:

A, B, and C are partners sharing profits in the ratio of 5 : 3 : 2. C retires and his share is taken by A. Calculate new profit-sharing ratio of A and B.

Answer:

Old Ratio (A, B and C) = 5 : 3 : 2

C retires from the firm.

His profit share = 210

C’s share is taken by A in entirety

New Ratio = Old Ratio + Share acquired from C

A's New Share: 510+210=710B's New Share: 310+0=310

 New Profit Ratio (A and B) = 7 : 3

Page No 5.81:

Question 14:

P, Q and R are partners sharing profits in the ratio of 7 : 5 : 3. P retires and it is decided that profit-sharing ratio between Q and R will be same as existing between P and Q. Calculate New profit-sharing ratio and Gaining Ratio.

Answer:

Calculation of Gaining RatioP :Q :R=7:5:3(Old ratio)Q :R=7:5 (New ratio, same as between P & Q)Gaining Ratio = New Ratio - Old RatioQ's Gain=712515=352060=1560R's Gain=512315=251260=1360Q :R=15:13

Page No 5.81:

Question 15:

Murli, Naveen and Omprakash are partners sharing profits in the ratio of 3/8, 1/2 and 1/8. Murli retires and surrenders 2/3rd of his share in favour of Naveen and remaining share in favour of Omprakash. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.

Answer:

Old Ratio=3:4:1Murli's share=38Share acquired by Naveen=38×23=28Remaining Share=3828=18acquired by OmprakashGaining Ratio=28:18=2:1Naveen's New Share=48+28=68Omprakash's New Share=18+18=28New Profit Sharing Ratio=3:1

Page No 5.81:

Question 16:

A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. B decides to retire from the firm. Calculate new profit-sharing ratio of A and C in the following circumstances:
(a) If B gives his share to A and C in the original ratio of A and C.
(b) If B gives his share to A and C in equal proportion.
(c) If B gives his share to A and C in the ratio of 3 : 1.
(d) If B gives his share to A only.

Answer:

Old Ratio (A, B and C) = 4 : 3 : 2

B retires from the firm.

His profit share =

Case (a) B gives his share to A and C in their original ratio.

Original Share (A and C) = 4 : 2



New Ratio = Old Ratio + Share acquired from B



∴ New Profit Ratio (A and C) = 36 : 18 or 2 : 1

Case (b) B gives his share to A and C in equal proportion.



New Ratio = Old Ratio + Share acquired from B



∴ New Profit Ratio (A and C) = 11 : 7

Case (c) B gives his to A and C in the ratio 3 : 1.



New Ratio = Old Ratio + Share acquired from B



∴ New Profit Ratio (A and C) = 25 : 11

Case (d) B gives his share to A only.

A’s New Share = A’s Old Share + Share of B
C’s Share
∴ New Profit Ratio (A and C) = 7 : 2

Page No 5.81:

Question 17:

L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at â‚¹ 72,000. Calculate M's share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.

Answer:

Journal
Particulars
L.F.
Date
Amount
Rs
Credit
amount
Rs
L’s Capital A/c
Dr.
 
13,000
 
O’s Capital A/c
Dr.
 
11,000
 
To M’s Capital A/c
 
 
24,000
(Adjustment M’s share of goodwill made)
 
 
 
 
 
 
 

Working Note:

WN 1 Calculation of Gaining Ratio

Old Ratio (L, M and O) = 4 : 3 : 2

M retires from the firm.

New Ratio (L and O) = 5 : 3

Gaining RatioNew Ratio − Old Ratio



∴ Gaining Ratio = 13 : 11

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 72,000



This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 13 : 11).

Page No 5.81:

Question 18:

P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2017, S retired from the firm. On S's retirement the goodwill of the firm was valued at â‚¹ 4,20,000. The new profit-sharing ratio between P, Q and R will be 4 : 3 : 3.
Showing your  working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S's retirement.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

  R’s  Capital A/c

Dr.

 

84,000

 
    To P’s  Capital A/c      

42,000

    To S’s  Capital A/c      

42,000

  (Goodwill adjusted)        
           

Working Notes:

Gaining Ratio = New Ratio – Old Ratio 

P=410510=110sacrificeQ=310310=0R=310110=210

P's share=4,20,000×110=42,000R's share=4,20,000×210=84,000S's share=4,20,000×110=42,000

Page No 5.81:

Question 19:

Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3 : 2 : 1. Manisha retired and goodwill of the firm is valued at â‚¹ 1,80,000. Aparna and Sonia decided to share future profits in the ratio of 3 : 2. Pass necessary Journal entries.

Answer:

Journal 

 

Date

Particulars

L.F.

Amount

(₹)

Amount

(₹)

 

Aparna’s Capitals A/c

Dr.

 

18,000

 
 

Sonia’s Capital A/c

Dr.

 

42,000

 
 

   To Manisha’s Capital A/c

     

60,000

 

(Manisha’s share of goodwill adjusted to Aparna’s and Sonia’s Capital Account in their gaining ratio)

     

Working Notes:

WN1: Calculation of Manisha’s Share in Goodwill

Manisha's share=Firm's Goodwill×Manisha's Profit ShareManisha's share=1,80,000×13=60,000


WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio

Aparna's gain=3536=330Sonia's gain=2516=730Gaining Ratio=3:7
Aparna's share=60,000×310=18,000Sonia's share=60,000×710=42,000

Page No 5.81:

Question 20:

Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of â€‹â‚¹ 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at â‚¹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries. 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Hanny’s Capital A/c

Dr.

 

30,000

 

 

Pammy’s Capital A/c

Dr.

 

20,000

 

 

Sunny’s Capital A/c

 

 

10,000

 

 

To Goodwill A/c

 

 

 

60,000

 

(Old goodwill written-off in old ratio)

 

 

 

 

 

 

 

 

 

 

 

Hanny’s Capital A/c

Dr.

 

14,000

 

 

Sunny’s Capital A/c

Dr.

 

14,000

 

 

To Pammy’s Capital A/c

 

 

 

28,000

 

(Adjustment for goodwill in gaining ratio)