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#### 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 ₹ 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: ₹         82,000; 2nd year: ₹ 90,000; 3rd year ₹ 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.

 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

#### 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 ₹ 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 ₹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ₹ 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 ₹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Chetan's Capital Account to be presented to his executor.

 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

#### 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 ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.

 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

#### 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 ${2}^{1}{2}}$ years' purchase of average of last 4 years' profits which were:
2014-15: ₹ 65,000;  2015-16: ₹ 60,000; 2016-17: ₹ 80,000 and 2017-18: ₹ 75,000.
(b) Machinery be valued at ₹ 1,40,000; Patents be valued at ₹ 40,000; Leasehold be valued at ₹ 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 ₹ 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.

 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 2019 2019 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 2020 Aug. 01 Interest (75,000 × 10% for 4 months) 2,500 Jan. 31 Cash A/c (25,000 + 2,500) 27,500 2020 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

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 =$75,000×\frac{2}{10}×\frac{4}{12}=Rs.5,000$

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

#### 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) ₹ 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.

 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

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)

#### 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 ₹ 70,000; ₹ 60,000; ₹ 50,000 and ₹ 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.

(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

#### 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: ₹ 24,000; 2016-17: ₹ 16,000; 2015-16: ₹ 20,000 and 2014-15: ₹ 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 ₹ 15,000; Furniture ₹ 1,500; Plant and Machinery ₹ 5,000; Building ₹ 35,000. A Bill Receivable for ₹ 600 was found worthless.
(d) A Sum of ₹ 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.

 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

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

#### 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 ₹ 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 ${2}^{1}{2}}$ 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 ₹ 2,00,000; Machinery overvalued by ₹ 1,50,000 and Furniture overvalued by ₹ 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.

 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

WN2: Calculation of Interest on Capital

WN3: Calculation of Profit & Loss Suspense

WN4: Calculation of Share in Goodwill

#### 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
​
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 ₹ 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 ₹ 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 ₹ 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.

 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 $\left(1,22,600×\frac{10}{100}×\frac{6}{12}\right)$ 6,130 Mar.31 Interest $\left(61,300×\frac{10}{100}×\frac{3}{12}\right)$ 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 $\left(61,300×\frac{10}{100}×\frac{3}{12}\right)$ 1,532.5 64,365 64,365

Working Notes:

WN1: Calculation of Profit & Loss Suspense

WN2: Calculation of Gaining Ratio and Share of Goodwill

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.

#### 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 ${2}^{1}{2}}$ 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 ₹ 14,000 and machinery is overvalued by ₹ 13,600.
(iii) All debtors are good. A debtor whose dues of ₹ 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, ₹ 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 ₹ 1,000 on account of Workmen Compensation to be provided for.
(vii) Investment be sold for ₹ 8,200 and a sum of ₹ 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.

 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

WN2: Calculation of Goodwill

#### 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 ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 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.

 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

WN2: Calculation of Share in Goodwill

WN3: Calculation of Profit & Loss Suspense

#### 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.

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

#### 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.

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

#### 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.

(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

#### 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.

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

#### 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.

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

M retires from the firm.

His profit share = $\frac{1}{5}$

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

New Ratio = Old Ratio + Share acquired from M

New Profit Ratio (R and S) = 7 : 8

#### 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.

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

#### 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.

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

#### 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.

Calculation of Gaining Ratio

New Ratio after Y's retirement = 5 : 2

Gaining Share = New Share – Old Share

Gaining Ratio = 15 : 6 or 5 : 2

#### 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.

(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

#### 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.

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

#### 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 .

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

#### 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.

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

B retires from the firm.

His profit share = $\frac{4}{15}$

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

New Ratio = Old Ratio + Share acquired from B

New Profit Ratio (A and C) = 2 : 1

#### 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.

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

C retires from the firm.

His profit share = $\frac{2}{10}$

C’s share is taken by A in entirety

New Ratio = Old Ratio + Share acquired from C

New Profit Ratio (A and B) = 7 : 3

#### 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.

#### 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.

#### 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.

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

#### 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 ₹ 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.

 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

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).

#### 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 ₹ 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.

 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

$\begin{array}{l}\mathrm{P}=\frac{4}{10}-\frac{5}{10}=-\frac{1}{10}\left(\mathrm{sacrifice}\right)\\ \mathrm{Q}=\frac{3}{10}-\frac{3}{10}=0\\ \mathrm{R}=\frac{3}{10}-\frac{1}{10}=\frac{2}{10}\end{array}$

#### 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 ₹ 1,80,000. Aparna and Sonia decided to share future profits in the ratio of 3 : 2. Pass necessary Journal entries.

 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

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

#### 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 ​₹ 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at ₹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries.