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Page No 4.100:

Question 71:

X and Y are partners sharing profits  and losses equally. Their Balance  Sheet as on 31st March, 2018 is given below:  

 

Liabilities

Assets

Capital A/cs:

 

Land and Building
1,50,000

 X

1,50,000

 

Plant and Machinery 1,00,000

 Y

1,00,000

2,50,000
Furniture and Fittings 25,000
Current A/cs:                                        Stock  
75,000

 X

40,000

 

Debtors
75,000

 

 Y 30,000 70,000 Less: 5% Reserve for D. Debts 5,000 70,000

Creditors

  1,30,000 Bill Receivalbe
30,000
Bill Payable

 

50,000
Bank
50,000

 

 

 

 

 

 

5,00,000

 

5,00,000

 

 

 

 

Z is admitted as a new partner for 1/4th  share under the following terms :
(a) Z is to introduce  ₹  1,25,000  as capital .
(b)  Goodwill of the firm was valued at nil.
(c)  It is found that the creditors included a sum of ₹  7,500 which was not to be paid . But it was also found that there was a liability for compensation to Workmen amounting to ₹  10,000. 
(d) Provision for Doubtful Debts  is to be created  @ 10% on debtors.
(e)  In regard to the  Partners' Capital Accounts  present fixed capital  method is to be converted into fluctuating capital method .
(f) Bills of  ₹  20,000 accepted from creditors were not recorded in the books.
(g) X provides ₹  50,000 loan to the business carrying interest @ 10% p.a.  
You are required to prepare Revaluation Account , Partners' Capital Accounts, Bank Account and the  Balance Sheet of the new firm.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Reserve for D. Debts

2,500

Creditors

7,500

Liability for WCF 10,000

Loss transferred to

 

   

  X’s Current A/c

2,500

   

  Y’s Current A/c

2,500

   

 

 

 

12,500

 

12,500

 

 

 

 

 

Partners’ Current Accounts

Dr.

                                                                                            Cr.

Particulars

X Y

Particulars

X Y

Revaluation A/c

2,500

2,500

Balance b/d

40,000

30,000

Balance c/d

37,500

27,500

     

 

40,000

30,000

 

40,000

30,000

 

 

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X Y Z

Particulars

X Y Z
     

 

Balance b/d

1,50,000

1,00,000

 

 

 

 

 

Current A/c 37,500 27,500

 

Balance c/d

1,87,500 1,27,500

1,25,000

Bank

 

 

1,25,000

 

1,87,500 1,27,500

1,25,000

 

1,87,500 1,27,500

1,25,000

 

 

 

 

 

 

 

 

 

Balance Sheet
as on 1st April, 2018

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors (1,30,000 – 7,500 – 20,000)

1,02,500

Land and Building

1,50,000

Bills Payable (50,000 + 20,000)

70,000

Plant and Machinery

1,00,000

Capital A/cs:

 

Fixture and Fittings

25,000

X

1,87,500

 

Stock 75,000

Y

1,27,500

 

Bills Receivables

30,000

Z

1,25,000

4,40,000

Bank (50,000 + 1,25,000 + 50,000)

2,25,000

X's Loan

50,000

Debtors

75,000

 

Liability for WCF

10,000

Less: 10% Reserve for D. Debts

7,500

67,500

   

 

 

 

 

 

 

 

 

 

6,72,500

 

6,72,500

 

 

 

 

Page No 4.100:

Question 72:

Rajesh and Ravi are partners sharing profits in the ratio of  3: 2 . Their Balance Sheet at 31st March , 2018 stood as:

BALANCE SHEET
as at 31st March, 2018

Liabilities

Assets

Creditors

38,500

Cash

2,000

Outstanding Rent 4,000 Stock 15,000
Capital A/cs:   Prepaid Insurance 1,500

 

 

Debtors

9,400

 

 

         

 

   Less : Provision for D.D.

400

9,000

​Rajesh 29,000      
Ravi
15,000

44,000

 

 

    Machinery 19,000
    Building 35,000
    Furniture 5,000

 

86,500

 

86,500

 

 

 

 


Raman is admitted as a new partner introducing a capital of ₹  16,000. The new profit-sharing ratio is decided as 5 : 3 : 2 . Raman is unable  to bring in any cash  for goodwill . So it is decided to value  the goodwill on the  basis of Raman's share  in the profits  and the capital contributed  by him. Following revaluation s are made 
(a) Stock to depreciate by 5% ;
(b) Provision for Doubtful Debts is to be ₹  500;
(c) Furniture to depreciate  by 10% ;
(d) Building is valued at ₹  40,000.
Show necessary Ledger Accounts and Balance  Sheet of new firm.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

750

Building

5,000

Provision for D. Debts

500

 

 

 

Less: Old Provision

400

100

 

 

Furniture

500

 

 

 

 

 

 

Profit on Revaluation transferred to

 

 

 

Rajesh Capital

2,190

 

 

Ravi Capital

1,460

 

 

 

5,000

 

5,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

Rajesh

Ravi

Raman

Particulars

Rajesh

Ravi

Raman

 

 

 

 

Balance b/d

29,000

15,000

 

 

 

 

 

Revaluation

2,190

1,460

 

Balance c/d

31,190

16,460

16,000

Cash

 

 

16,000

(before and just went of

 

 

 

 

 

 

 

Goodwill)

 

 

 

 

 

 

 

 

31,190

16,460

16,000

 

31,190

16,460

16,000

Rajesh’s Capital

 

 

1,635

Balance c/d

31,190

16,460

16,000

Raman’s Capital

 

 

1,635

Raman’s Capital

1,635

1,635

 

Balance c/d

32,825

18,095

12,730

 

 

 

 

 

32,825

18,095

16,000

 

32,825

18,095

16,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2018 after Raman’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

38,500

Cash (2,000 + 16,000)

18,000

Outstanding Rent

4,000

Stock (15,000 – 750)

14,250

Capital A/cs:

 

Prepaid Insurance

1,500

Rajesh

32,825

 

Debtors

9,400

 

Ravi

18,095

 

Less: Provision for D. Debts

500

8,900

Raman

12,730

63,730

Machinery

19,000

 

 

Building (35,000 + 5,000)

40,000

 

 

Furniture (5,000 – 500)

4,500

 

1,06,150

 

1,06,150

 

 

 

 


Working Notes-

WN1 Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio



WN2 Calculation of Goodwill
Actual Capital of all Partners before adjustment of goodwill = Rajesh’s Capital + Ravi’s Capital + Raman’s Capital
= 31,190 + 16,460 + 16,000
= Rs 63,650
Capitalised value on the basis of Raman’s share

Raman’s share of Goodwill


WN3 Adjustment of Raman’s share of goodwill
Rajesh and Ravi each Capital Accounts will be credited by

Journal

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Raman’s Capital A/c

Dr.

 

3,270

 

To Rajesh’s Capital A/c

 

 

1,635

To Ravi’s Capital A/c

 

 

1,635

(Raman’s share of goodwill adjusted)

 

 

 

 

 

 

 


WN4 Distribution of Profit on Revaluation (in old ratio)



Page No 4.101:

Question 73:

A and B are partners in a firm sharing profits in the ratio of 3 : 2 . They admit C as a partner on 1st April, 2018 on  which date the Balance Sheet of the firm was:

 

Liabilities

Assets

Capital A/cs:

 

Building

50,000

A

60,000

 

Plant and Machinery

30,000

B

40,000

1,00,000

Stock

20,000

Creditors

 

20,000

Debtors

10,000

      Bank 10,000
         
         

 

 

1,20,000

 

1,20,000

 

 

 

 

 


You are required to prepare the Revaluation Account , Partners' Capital Accounts and Balance Sheet of the new firm after considering the following;
(a) C brings in ₹ 30,000 as capital for 1/4th share. He also brings ₹ 10,000 for his share of goodwill.
(b) Part of the Stock which had been included at cost of ₹ 2,000 had been badly damaged in storage and could  only expect to realise ₹ 400.
(c) Bank Charges had been overlooked  and amounted to ₹ 200 for the year 2017-18.
(d) Depreciation on Building of ₹ 3,000 had been omitted for the year 2017-18.
(e) A credit for goods for ₹ 800 had been omitted from both purchases and creditors although the goods had been correctly included in Stock.
(f) An expense of ₹ 1,200 for insurance premium was debited in the Profit and Loss Account of 2017-18 but ₹ 600 of this are related to the period after 31st March, 2018.

Answer:

Revaluation Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock (2,000 – 400)

1,600

 

 

Bank (charges)

200

Prepaid Insurance

600

Building

3,000

 

 

Creditors

800

Loss transferred to

 

 

 

  A Capital

3,000

 

 

B Capital

2,000

 

5,600

 

5,600

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

Revaluation

3,000

2,000

 

Balance b/d

60,000

40,000

 

 

 

 

 

Bank

 

 

30,000

 

 

 

 

Premium for Goodwill

6,000

4,000

 

Balance c/d

63,000

42,000

30,000

 

 

 

 

 

66,000

44,000

30,000

 

66,000

44,000

30,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2018 after C’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital A/cs:

 

Building (50,000 – 3,000)

47,000

A

63,000

 

Plant and Machinery

30,000

B

42,000

 

Stock (20,000 – 1,600)

18,400

C

30,000

1,35,000

Debtors

10,000

Creditors (20,000 + 800)

20,800

Bank

49,800

 

 

Prepaid Insurance

600

 

1,55,800

 

1,55,800

 

 

 

 

 

Bank Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

10,000

Revaluation (Bank charges)

200

C’s Capital

30,000

 

 

Premium for Goodwill   

10,000

Balance c/d

49,800

 

50,000

 

50,000

 

 

 

 


Working Notes:

WN1 Sacrificing Ratio
Old Ratio (A and B) 3 : 2
Sacrificing Ratio = 3 : 2

WN2 Distribution of Premium for Goodwill

Page No 4.101:

Question 74:

A and B are partners in a firm . The net profit of the firm is divided as follows : 1/2 to A , 1/3 to B and 1/6 carried to a Reserve . They admit  C as a partner on 1st April, 2018 on which date , the Balance Sheet of the firm was:


 

 

Liabilities

Assets

Capital A/cs:

 

Building

50,000

A

50,000

 

Plant and Machinery

30,000

B

40,000

90,000

Stock

18,000

Reserve

 

10,000

Debtors

22,000

Creditors   20,000 Bank 5,000
Outstanding Expenses   5,000    
         

 

 

1,25,000

 

1,25,000

 

 

 

 

 



Following are the required adjustments on admission of C :
(a)  C brings in ₹ 25,000 towards his capital.
(b) C also brings in ₹ 5,000 for 1/5 th share of goodwill.
(c) Stock is undervalued by 10%.
(d) Creditors include a contingent liability of ₹ 4,000 , which has been decided by the court at ₹ 3,200.
(e) In regard to the Debtors , the following Debts proved Bad or Doubtfullong dash
₹ 2,000 due from  Xlong dashbad to the full extent;
₹ 4,000 due from Ylong dashinsolvent , estate expected to pay  only 50%.
You are required to prepare Revaluation Account , Partners' Capital Accounts and Balance Sheet of the new firm.

Answer:

Revaluation Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bad Debts

2,000

Stock

2,000

Provision for Doubtful Debts

2,000

Creditors (4,000 – 3,200)

800

(4,000 × 50%)

 

 

 

 

 

Loss transferred to

 

 

 

   A Capital

720

 

 

   B Capital

480

 

4,000

 

4,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

Revaluation

720

480

 

Balance b/d

50,000

40,000

 

 

 

 

 

Reserve

6,000

4,000

 

 

 

 

 

Bank

 

 

25,000

Balance c/d

58,280

45,520

25,000

Premium for Goodwill

3,000

2,000

 

 

59,000

46,000

25,000

 

59,000

46,000

25,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2018 after C’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital A/cs:

 

Building

50,000

A

58,280

 

Plan and Machinery

30,000

B

45,520

 

Stock (18,000 × 100/90)

20,000

C

25,000

1,28,800

Debtors

22,000

 

Creditors (20,000 – 800)           

19,200

Less: Bad Debts

2,000

 

Outstanding Expenses

5,000

Less: Prov. for D. Debts

2,000

18,000

 

 

Bank (5,000 + 30,000)

35,000

 

1,53,000

 

1,53,000

 

 

 

 


Working Notes

WN1


WN2
Distribution of Reserve


WN3
Distribution of Premium for Goodwill



Page No 4.102:

Question 75:

Following is the Balance Sheet of the firm, Ashirvad, owned by A , B and C who share profits and losses of the business in the ratio of 3 : 2 :1 .
 

BALANCE SHEET as at 31st March, 2018

Liabilities

Assets

Capital A/cs:

 

Furniture

95,000

A

1,20,000

 

Business Premises

2,05,000

      B         1,20,000    Stock-in-Trade 40,000

C

1,20,000

3,60,000

Debtors

28,000

Sundry Creditors

 

20,000

Cash at Bank

15,000

Outstanding Salaries and wages   7,200 Cash in Hand 4,200
         
         

 

 

3,87,200

 

3,87,200

 

 

 

 

 



On 1st April, 2018, they admit D as a partner on the following conditions :

(a) D will bring in ₹ 1,20,000 as his capital and also ₹ 30,000 as goodwill premium for a quarter of the share in the future profits / losses of the firm.
(b) The values of the fixed assets  of the firm will be increased  by 10% before the admission  of D .
(c) Mohan, an old customer whose account was written off as bad debts , has promised to pay ₹ 3,000 in full settlement of his dues.
(d) The future profits and losses of the firm will be shared equally by all the partners .
Pass the necessary journal entries and Prepare Revaluation Account, Partners' Capital Accounts and opening Balance Sheet of the new firm

Note: There will be no entry for the promise made by Mohan, since it is an event and not a transaction. There is another view , ₹ 3,000 is to be considered as bad debts recovered . In this situation result will be as follows :
Gain( Profit) on Revaluation₹ 36,000; Capital A/cs: A₹ 1,66,000; B₹ 1,42,000; C₹ 1,16,000; D's Capital₹ 1,20,000; Balance Sheet Total₹ 5,72,000.

Answer:

Revaluation Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

 

 

Fixed Assets:

 

 

 

Furniture

95,000 × 10%

9,500

Profit transferred to            

 

Business  Premises

2,05,000 × 10%

20,500

A Capital

15,000

 

 

B Capital

10,000

 

 

C Capital

5,000

 

 

 

 

 

 

 

30,000

 

30,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

 

 

Cr.

Particulars

A

B

C

D

Particulars

A

B

C

D

A’s Capital (Goodwill)

 

 

7,500

 

Balance b/d

1,20,000

1,20,000

1,20,000

 

B’s Capital (Goodwill)

 

 

2,500

 

Revaluation (Profit)

15,000

10,000

5,000

 

 

 

 

 

 

Cash

 

 

 

1,20,000

Balance c/d

1,65,000

1,40,000

1,15,000

1,20,000

Premium for Goodwill

22,500

7,500

 

 

 

 

 

 

 

C’s Capital (Goodwill)

7,500

2,500

 

 

 

1,65,000

1,40,000

1,25,000

1,20,000

 

1,65,000

1,40,000

1,25,000

1,20,000

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 1, 2018, after D’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital A/cs:

 

Furniture (95,000 + 9,500)

1,04,500

A

1,65,000

 

Business Premises (2,05,000+20,500)

2,25,500

B

1,40,000

 

Stock-in-Trade

40,000

C

1,15,000

 

Debtors

28,000

D

1,20,000

5,40,000

Cash at Bank

15,000

Sundry Creditors

20,000

Cash in hand (4,200 + 1,50,000)

1,54,200

Outstanding salaries and wages

7,200

 

 

 

5,67,200

 

5,67,200

 

 

 

 


Working Note:

WN1 Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio



WN2 Calculation of C’s gain in goodwill


WN3 Amount of Goodwill to be distributed between A and B (Sacrificing Partners)



WN4 Journal Entries for D’s Capital and distribution of goodwill
 

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Cash A/c

Dr.

 

1,50,000

 

To D’s Capital A/c

 

 

1,20,000

To Premium for Goodwill A/c

 

 

30,000

(D brought Capital and share of Capital)

 

 

 

 

 

 

 

Premium for Goodwill

Dr.

 

30,000

 

C’s Capital A/c

Dr.

 

10,000

 

To A’s Capital A/c

 

 

30,000

To B’s Capital

 

 

10,000

(Gain goodwill distributed between A and B
in sacrificing ratio i.e. 3:1)

 

 

 

 

 

 

 



Page No 4.103:

Question 76:

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2 . Following is their Balance Sheet as at 31st March, 2018:


 

 

Liabilities

Assets

Capital A/cs:

 

Building

35,000

A

50,000

 

 Machinery

25,000

B

30,000

80,000

Stock

15,000

Creditors

 

20,000

Debtors

15,000

      Investments 5,000
      Bank 5,000
         

 

 

1,00,000

 

1,00,000

 

 

 

 

 



C is admitted as a partner on 1st April, 2018 on the following terms:
(a) C is to pay ₹ 20,000 as capital for 1/4th share. He also pays ₹ 5,000 as premium for goodwill.
(b) Debtors amounted to ₹ 3,000 is to be written off as bad and a Provision of 10% is created against Doubtful Debts on the remaining amount.
(c) No entry has been passed in respect of a debt of ₹ 300 recovered by A from a customer , which was previously written off as bad in previous year . The amount is to be paid by A.
(d) Investments are taken  over by B at their market value of ₹ 4,900 against cash payment .
You are required to prepare Revaluation Account, Partner's Capital  Accounts and new Balance Sheet

Answer:

Revaluation Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bad Debts

3,000

A's Capital A/c

300

Provision for Doubtful Debts

1,200

Loss transferred to         

 

Investment (5,000 – 4,900)

100

A Capital

2,400

 

 

B Capital

1,600

 

4,300

 

4,300

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

Revaluation

2,400

1,600

 

Balance b/d

50,000

30,000

 

Revaluation

300

 

 

Bank

 

 

20,000

 

 

 

 

Premium for Goodwill

3,000

2,000

 

Balance c/d

50,300

30,400

20,000

 

 

 

 

 

53,000

32,000

20,000

 

53,000

32,000

20,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2018 after C’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital A/cs:

 

Buildings

35,000

    A

50,300

 

Machinery

25,000

    B

30,400

 

Stock

15,000

   C

20,000

1,00,700

Debtors

15,000

 

Creditors

20,000

Less: Bad Debts

3,000

 

 

 

 

12,000

 

 

 

Less: 10% Provision for Doubtful Debts

1,200

10,800

 

 

Bank

34,900

 

1,20,700

 

1,20,700

 

 

 

 

 

Bank Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

5,000

 

 

C’s Capital

20,000

 

 

Premium for Goodwill

5,000

 

 

Investments

4,900

Balance c/d

34,900

   

 

 

 

34,900

 

34,900

 

 

 

 


Working Notes:

WN1


WN2
Distribution of Premium for Goodwill


WN3
Sale of Investments

Bank A/c

Dr.

4,900

 

Revaluation A/c

Dr.

100

 

To Investment

 

5,000


WN4

Bad debt Recovered

A's Capital A/c        

Dr.

300

 

To Revaluation A/c

 

 

300

Page No 4.103:

Question 77:

X and Y are partners sharing profits and losses in the ratio of 3/4 and 1/4 . Their Balance Sheet as at 31st March, 2018 is:

 

 

Liabilities

Assets

Capital A/cs:

 

 Land and Building

1,25,000

X

1,50,000

 

Furniture

5,000

Y

80,000

2,30,000

Stock

1,00,000

Workmen Compensation Reserve

 

20,000

Sundry Debtors

80,000

Sundry Creditors   1,50,000 Bills Receivable 15,000
Bills Payable   37,500 Cash at Bank 1,00,000
      Cash in Hand 12,500

 

 

4,37,500

 

4,37,500

 

 

 

 

 



They admit Z into partnership on 1st April, 2018 on the following terms:
(a) Goodwill is to be valued at ₹ 1,00,000.
(b) Stock and Furniture to be reduced by 10%.
(c) A Provision for Doubtful Debts is to be created @ 5% on Sundry Debtors .
(d) The value of Land and Building  is to be appreciated by 20%.
(e) Z pays ₹ 50,000 as his capital for 1/5th share in the future profits.
You are required to show Revaluation Account , Partners' Capital Accounts and Balance Sheet of the new firm.


Note: Z's Share of Goodwill ₹ 20,000 (i.e, ₹ 1,00,000 × 1/5 ) can be adjusted through Z's Current A/c. In that situation, Partners' Capital A/cs: X₹ 1,87,875; Y​₹ 92,625; Z​₹ 50,000; Z's Current A/c (Dr.)​₹ 20,000; Balance Sheet Total​₹ 5,18,000.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

10,000

Land and Building

25,000

Furniture

500

   (1,25,000 × 20%)

 

Provision for D. Debts

4,000

 

 

Profit transferred to

 

 

 

X Capital

7,875

 

 

Y Capital

2,625

 

 

 

25,000

 

25,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

X’s Capital

 

 

15,000

Balance b/d

1,50,000

80,000

 

Y’s Capital

 

 

5,000

Workmen’s Compensation Fund

15,000

5,000

 

 

 

 

 

Revaluation (Profit)

7,875

2,625

 

Balance c/d

1,87,875

92,625

30,000

Cash

 

 

50,000

 

 

 

 

Z’s Capital

15,000

5,000

 

 

1,87,875

92,625

50,000

 

1,87,875

92,625

50,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2018 after Z’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital A/cs:

 

Land and Building (1,25,000 + 25,000)

1,50,000

  X

1,87,875

 

 

 

  Y

92,625

 

Office Furniture (5,000 – 500)

4,500

  Z

30,000

3,10,500

Stock (1,00,000 – 10,000)

90,000

Sundry Creditors                      

1,50,000

Sundry Debtors

80,000

 

Bills Payable

37,500

Less: 5% Provision for D. Debts

4,000

76,000

 

 

Cash at Bank

1,00,000

 

 

Cash in Hand (12,500 + 50,000)

62,500

 

 

Bills Receivable

15,000

 

4,98,000

 

4,98,000

 

 

 

 


Working Notes:

WN1: Sacrificing Ratio


WN2: Calculation of Partners' Share of Goodwill
Goodwill of the firm = 1, 00,000

 

 

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Z’s Capital A/c

Dr.

 

20,000

 

 

To X’s Capital A/c

 

 

15,000

 

To Y’s Capital A/c

 

 

5,000

 

(Z’s share of goodwill changed from his
Capital Account)

 

 

 

 

 

 

 

 

 

Workmen’s Compensation Fund A/c

 

20,000

 

 

To X’s Capital A/c

 

 

15,000

 

To Y’s Capital

 

 

5,000

 

(Workmen’s Compensation Fund distributed)

 

 

 

 

 

 

 

 



Page No 4.104:

Question 78:

Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2 . On 31st March,2018 their Balance Sheet was:

 

Liabilities

Assets

Sundry Creditors

16,000

Cash in Hand

1,200

Public Deposits 61,000 Cash at Bank 2,800
Bank Overdraft 6,000 Stock 32,000
Outstanding Liabilities 2,000 Prepaid Insurance 1,000

Capital A/cs:

 

Sundry Debtors

28,000

 

 

         

 

   Less : Provision for D.D.

800

28,000

         

  Deepika

48,000

 












 

 

 

  Rajshree

40,000

88,000

Plant and Machinery

 

48,000

    Land and Building 50,000
    Furniture 10,000
       

 

1,73,000

 

1,73​,000

 

 

 

 

​​

On the above date , the partners decided to admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika , Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in ₹ 32,000 as his capital.
(c)  Anshu is unable to bring in any cash for his share of goodwill. Partners' therefore, decide to calculate the goodwill on the basis of Anshu's share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at ₹ 60,000, Stock at ₹ 40,000 and the Provision for Doubtful Debts is to be maintained at ₹ 4,000. Value of Land and Building has appreciated by 20% . Furniture has been depreciated by 10%.
(e) There is and additional liability of ₹ 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities , stated in the above Balance Sheet. Partners decide to show this liability  in the books of account of the reconstituted firm.
Prepare Revaluation Account , Partners' Capital Accounts and Balance Sheet of Deepika , Rajshree and Anshu.

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Reserve for D. Debts

4,000

 

Plant and Machinery

12,000

Less: Old Reserve

800

3,200

    (60,000 – 48,000)

 

 

 

 

 

Furniture          10,000 × 10% 1,000 Stock (40,000 – 32,000) 8,000

Outstanding salary

8,000

 

 

Profit transferred to  

 

Land and Building

10,000

   Deepika Capital

10,680

    (50,000 × 20%)

 

   Rajshree Capital

7,120

 

 

 

30,000

 

30,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

Deepika

Rajshree

Anshu

Particulars

Deepika

Rajshree

Anshu

Balance c/d

58,680

47,120

32,000

Balance b/d

48,000

40,000

 

(before adjustment of Goodwill)

 

 

 

 

 

 

 

 

 

 

 

Revaluation

10,680

7,120

 

 

 

 

 

Cash

 

 

32,000

 

58,680

47,120

32,000

 

58,680

47,120

32,000

 

 

 

 

 

 

 

 

Deepika

 

 

2,220

Balance b/d

58,680

47,120

32,000

Rajshree

 

 

2,220

Anshu’s Capital (Goodwill)

2,220

2,220

 

Balance c/d

60,900

49,340

27,560

 

 

 

 

 

60,900

49,340

32,000

 

60,900

49,340

32,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2018 after Anshu’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Outstanding Salaries

8,000

Cash in Hand

1,200

Sundry Creditors

16,000

Cash at Bank

28,800

Public Deposits

61,000

Stock

40,000

Outstanding Liabilities                 

2,000

Prepaid Insurance

1,000

Capital A/cs:

 

Sundry Debtors

28,800

 

Deepika

60,900

 

Less: reserve for D. Debts

4,000

24,800

Rajshree

49,340

 

Plant and Machinery

60,000

Anshu

27,560

1,37,800

Land and Building

60,000

 

 

Furniture

9,000

 

2,24,800

 

2,24,800

 

 

 

 


Working Notes

WN1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio



WN2: Valuation of Goodwill
Capitalised value on the basis of Anshu’s share
Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000
= Rs 1,37,800
Goodwill = Capitalised value − Actual Capital of all partners before adjustment of Goodwill
= 1,60,000 − 1,37,800
= Rs 22,200
Anshu’s share of Goodwill
Deepika and Rajshree each will entitle for Goodwill

Page No 4.104:

Question 79:

X and Y are partners sharing profits in the ratio of 2 : 1 . Their Balance Sheet as at 31st March, 2018 was:

 

Liabilities

Assets

Sundry Creditors

25,000

Cash/Bank

5,000

General Reserve 18,000 Sundry Debtors 15,000
Capital A/cs:   Stock 10,000

X

75,000

 

Investments

8,000

Y

62,000

1,37,000

Typewriter

5,000

 

   

Fixed Assets

1,37,000

         
         
         

 

 

1,80,000

 

1,80,000

 

 

 

 

 

They admit Z into partnership on the same date on the following terms;
(a) Z brings in ₹ 40,000  as his capital and he is given 1/4th share in profits.
(b) Z brings in ₹ 15,000 for goodwill, half of which is withdrawn by old partners .
(c) Investments are valued at ₹ 10,000 . X takes over Investments at this value.
(d) Typewriter is to be depreciated by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on  31st March,2018 is ₹ 1,000.
(f) By bringing in r withdrawing cash , the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass journal entries , prepare Revaluation Account , Capital Accounts and new Balance Sheet of the firm.

Answer:

Journal

Date
2018

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

April 1

Revaluation A/c

Dr.

 

14,700

 

 

To Typewriter A/c

 

 

1,000

 

To Fixed Assets A/c

 

 

13,700

 

(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)

 

 

 

 

 

 

 

 

April 1

Stationery A/c

Dr.

 

1,000

 

 

Investment A/c

Dr.

 

2,000

 

 

To Revaluation A/c

 

 

3,000

 

(Increase in stationery and investment transferred to Revaluation Account)

 

 

 

 

 

 

 

 

April 1

X’s Capital A/c

Dr.

 

7,800

 

 

Y’s Capital A/c

Dr.

 

3,900

 

 

To Revaluation A/c

 

 

11,700

 

(Revaluation loss transferred to X and Y’s
Capital Account in their old ratio)

 

 

 

 

 

 

 

 

April 1

Reserve Fund A/c

Dr.

 

18,000

 

 

To X’s Capital A/c

 

 

12,000

 

To Y’s Capital A/c

 

 

6,000

 

(Reserve Fund distributed)

 

 

 

 

 

 

 

 

April 1

Cash A/c

Dr.

 

55,000

 

 

To Z’s Capital A/c

 

 

40,000

 

To Premium for Goodwill A/c

 

 

15,000

 

(Z brought capital and share of goodwill)

 

 

 

 

 

 

 

 

April 1

Premium for Goodwill A/c

Dr.

 

15,000

 

 

To X’s Capital A/c

 

 

10,000

 

To Y’s Capital A/c

 

 

5,000

 

(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)

 

 

 

 

 

 

 

 

April 1

X’s Capital A/c

Dr.

 

5,000

 

 

Y’s Capital A/c

Dr.

 

2,500

 

 

To Cash

 

 

7,500

 

(Half of the Premium for Goodwill withdrawn by X and Y)

 

 

 

 

 

 

 

 

April 1

X’s Capital A/c

Dr.

 

10,000

 

 

To Investments A/c

 

 

10,000

 

(X took over the Investment)

 

 

 

 

 

 

 

 

April 1

Cash A/c

Dr.

 

4,800

 

 

To X’s Capital A/c

 

 

4,800

 

(X’ brought cash to make up deficiency in capital)

 

 

 

 

 

 

 

 

April 1

Y’s Capital A/c

Dr.

 

26,600

 

 

To Cash A/c

 

 

26,600

 

(Y withdrew excess capital after all adjustments)

 

 

 

 

 

 

 

 

 

Cash/Bank Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

5,000

X’s Capital (Goodwill)

5,000

Z’s Capital

40,000

Y’s Capital (Goodwill)

2,500

Premium for Goodwill

15,000

Y’s Capital

26,600

X’s Capital

5,800

Balance c/d

31,700

 

65,800

 

65,800

 

 

 

 

 

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

 

 

 

 

Typewriter (5,000 × 20%)

1,000

Investment

2,000

Fixed Assets (1,37,000 × 10%)

13,700

Stationery

1,000

 

 

Loss transferred to

 

 

 

   X Capital

7,800

 

 

   Y Capital

3,900

 

14,700

 

14,700

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Revaluation

7,800