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Page No 4.67:

Answer:

Old Ratio of A and B = 21 : 9
Let the total share be = 1
C's Share of Profit=921Remaining Share = 1 - 921=1221A's Share = 1221 × 2130=84210B's Share = 1221 × 930=36210C's Share = 921 or 90210New Profit Share = 84 : 36 : 90 or 14 : 6 : 15

Page No 4.67:

Answer:

Ashok admits for share of profit

Ravi sacrifices in favour of Ashok =

Mukesh sacrifices in favour of Ashok =

New Ratio = Old Ratio − Sacrificing Ratio

Page No 4.67:

Answer:

Old ratio of A and B = 7 : 3

A's Share=710A surrenders in favour of C=710×17=110A's New Share = 710-110=610
B's share = 310B surrenders in favour of C = 310 × 13 = 110B's New share = 310 - 110 = 210C's share = 110 + 110 = 210New Profit Ratio = 6 : 2 : 2 or 3 : 1 : 1

Page No 4.67:

Answer:

Old Ratio = 1 : 1

Let the total share be = 1

Share of Black = 14or 520Remaining Share = 1 - 14 = 34Red's Share = 35 × 34 = 920White's Share = 25 × 34 = 620New Profit Sharing Ratio = 9 : 6 : 5

Page No 4.67:

Answer:

(i) Let the total share be = 1
 

Old ratio = 2 : 3 : 1

W is admitted for 16th share

Z’s share = 16
Total Share of Z and W = 16 + 16 = 13Remaining Share = 1 - 13 = 23Old Ratio between X and Y = 2 : 3X's New Share = 23 × 25 = 415Y's New Share = 23 × 35 = 615Z's Share = 16 or 530W's Share = 16 or 530New Profit share ratio = 8 : 12 : 5 : 5

(ii) Old Ratio = 3 : 2 : 5
 
A sacrifices = 15 × 15 = 125A's New Share = 310 - 125 = 1350B sacrifices = 15 × 15 = 125B's New Share = 210 - 125 = 850C sacrifices = 15 × 35 = 325C's New Share = 510 - 325 = 1950D's Profit Share = 15 or 1050New Profit Sharing ratio = 13 : 8 : 19 : 10

Page No 4.67:

Answer:

Old ratio = 3 : 2

Let the total share be = 1

Z's Share of Profit = 15Remaining Share = 1 - 15 = 45X's Share = 45 × 35 = 1225Y's Share = 45 × 25 = 825Z's Share = 15 or 525New Profit Share = 12 : 8 : 5 Sacrificing ratio = 3 : 2

Note: When nothing has been specified about the new profit sharing ratio, it has been assumed that the sacrificing ratio will be same as old ratio, i.e. 3 : 2.

Page No 4.67:

Answer:

Sacrificing Share = Old Ratio − New Ratio

 

Page No 4.67:

Answer:

Old ratio = 3 : 2
Share acquired from X = 27X's New Share = 35 - 27 = 1135Share acquired from Y = 17Y's New Share = 25 - 17 = 935Z's Profit Share = 27 + 17 = 37 or 1535New Profit Sharing Ratio = 11 : 9 : 15

Sacrificing Ratio = Old Ratio - New RatioSacrifice made by X = 35 - 1135 = 1035Sacrifice made by Y = 25 - 935 = 535Sacrificing Ratio = 10 : 5 or 2: 1

Page No 4.67:

Answer:

Profit sharing ratio of A and B = 4 : 1

Thus, Profit sharing ratio of B and C will also be 4 : 1

Let B’s Profit Share = 1

Since, C’s share of profit is 25% of B’s Profit Share

 C's Profit Share = 14×1=0.25

A’s Profit Share is 4 times the B’s Profit Share, thus, A’s Profit Share = 4

New Profit Share = 4 : 1 : 0.25 or 16 : 4 : 1

Sacrificing Ratio = Old Ratio – New Ratio

A=45-1621=68105B=15-421=17105Sacrificing Ratio = 68 : 17 or 4 :1

Page No 4.67:

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

P’s share = X’s Sacrifiece

Q’s share = Y’s Sacrifice

Page No 4.67:

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

∴New Profit Sharing Ratio = 75 : 48 : 37

 

Page No 4.67:

Answer:

Sacrificing Ratio = Old Ratio − Sacrificing Ratio

Page No 4.67:

Answer:

D is admitted for share of profit

Let the combined share of profit of A, B C and D be = 1

Combined share of A, B and C after D’s admission = 1 − D’s shares

New Ratio = Old Ratio × combined share of A, B and C

Sacrificing Ratio = Old Ratio − New Ratio

Page No 4.67:

Answer:

E is admitted for share

Let combined share of profit of all partners after E’s admission = 1

Combined share of A, B, C and D after E’s admission = 1 − E’s Share

New Ratio = Combined of A, B, C and D × Agreed Share of A, B, C and D

Page No 4.67:

Answer:

Old ratio = 3 : 2

Let the total share be = 1

Remaining Share = 1 - 14 = 34A and B decided to share future profits and losses in the ratio of 1 : 1A's Share = 12 × 34 = 38B's Share = 12 × 34 = 38C's Share = 14 or 28New Profit Sharing Ratio = 3 : 3 : 2Sacrificing Ratio = Old Ratio - New RatioSacrifice made by A= 35  38=940Sacrifice made by B = 25  38 = 140Sacrificing ratio of A and B = 9 : 1



Page No 4.68:

Answer:

Since goodwill has been paid privately, thus, no entry will be recorded in the books of the firm.

Page No 4.68:

Answer:

Since goodwill has been paid privately, thus, no entry will be recorded in the books of the firm.

Page No 4.68:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
48,000
 
    To Premium for Goodwill A/c      
48,000
  (Goodwill brought in by the new partner)        
           
  Premium for Goodwill A/c
Dr.
 
48,000
 
    To X’s Capital A/c      
28,800
    To Y’s Capital A/c      
19,200
   (Goodwill distributed among old partners in their sacrificing ratio)        
           

Working Notes:

Let the total share = 1

Z is admitted for 14th share

Remaining share = 1 - 14 = 34Old ratio of X and Y = 3 : 2X's new share = 35 × 34 = 920Y's share = 25 × 34 = 620Z's share = 14 or 520New profit sharing ratio = 9 : 6 : 5Sacrificing ratio of X and Y = 3 : 2

Note: When nothing has been specified about the new profit sharing ratio, it has been assumed that the sacrificing ratio will be same as old ratio, i.e. 3 : 2.

Page No 4.68:

Answer:

 
Books of...
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
10,000
 
    To Premium for Goodwill A/c
 
 
 
10,000
  (Goodwill brought in by the new partner)
 
 
 
 
   
 
 
 
 
  Premium for Goodwill A/c
Dr.
 
10,000
 
  F’s Capital A/c 40,000×120
Dr.
 
2,000
 
    To E’s Capital A/c 40,000×620
 
 
 
12,000
  (Goodwill distributed among old partners in their sacrificing ratio)
 
 
 
 

Working Notes

Sacrificing ratio = Old ratio – New ratio

Old ratio between E and F = 4 : 1

New ratio between E, F and G = 2 : 1 : 1

Sacrifice made by E = 45 - 24 = 620Sacrifice made by F = 15 - 14 = -120(gain)

Value of Firm’s Goodwill = 10,000 × 4 = Rs 40,000

Page No 4.68:

Answer:

 
Books of...
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
1,10,000
 
    To Premium for Goodwill A/c      
30,000
    To Z’s Capital A/c      
80,000
  (Capital and goodwill brought in by the new partner)        
           
  Premium for Goodwill A/c
Dr.
 
30,000
 
    To X’s Capital A/c      
10,000
    To Y’s Capital A/c      
20,000
  (Goodwill distributed among old partners in their sacrificing ratio)        

Partners’ Capital Accounts
Dr.  
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
Balance c/d
2,10,000
1,20,000
80,000
Balance b/d
2,00,000
1,00,000
 
        Bank A/c    
80,000
        Premium for Goodwill A/c
10,000
20,000
 
 
2,10,000
1,20,000
80,000
 
2,10,000
1,20,000
80,000
               

Working Notes:

Old ratio = 2 : 1

Z is admitted for 15th share

New ratio = 3 : 1 : 1

Sacrificing ratio = Old ratio – New Ratio

Sacrifice made by X = 23 - 35 = 115Sacrifice made by Y = 13 - 15 = 215Sacrificing ratio = 1 : 2

Page No 4.68:

Answer:

 
Books of…
 
Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
  Bank A/c
Dr.
 
91,500
 
    To Premium for Goodwill A/c 84,000×38  
 
31,500
    To Samir’s Capital A/c
 
 
 
60,000
  (Capital and goodwill brought in by the new partner)
 
 
 
 
   
 
 
 
 
  Premium for Goodwill A/c
Dr.
 
31,500
 
  Satish’s Capital A/c 84,000×556
Dr.
 
7,500
 
  To Sushil’s Capital A/c 84,000×2656  
 
39,000
  (Goodwill distributed among old partners in their sacrificing ratio)
 
 
 
 
   
 
 
 
 

Partners’ Capital Accounts
Dr.  
Cr.
Particulars
Sushil
Satish
Samir
Particulars
Sushil
Satish
Samir
 
 
 
 
 
 
 
 
Sushil’s Capital A/c
 
7,500
 
Balance b/d
48,000
42,000
 
Balance c/d
87,000
34,500
60,000
Bank A/c
 
 
60,000
 
 
 
 
Premium for Goodwill A/c
31,500
 
 
 
 
 
 
Satish’s Capital A/c
7,500
 
 
 
87,000
42,000
60,000
 
87,000
42,000
60,000
 
 
 
 
 
 
 
 
 
Balance Sheet
as on April 01, 2016 after Samir’s admission
Liabilities
Amount
Rs
Assets
Amount
Rs
Bank Loan
23,000
Bank
97,500
Creditors
55,000
Stock
12,000
Capital A/cs:
 
Plant & Machinery
30,000
  Sushil
87,000
 
Debtors
18,300
 
  Satish
34,500
 
  Less : Provision for Doubtful Debts
300
18,000
  Samir

60,000

1,81,500
Building
1,02,000
 
2,59,500
 
2,59,500
 
 
 
 

Working Notes:

Old ratio = 5 : 2

New ratio = 2 : 3 : 3

Sacrificing ratio = Old ratio – New ratio

Sacrifice made by Sushil = 57 - 28 = 2656Sacrifice made by Satish = 27 - 38 = -556 (gain)
   
Bank Account
Dr.  
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
6,000
Balance c/d
97,500
Premium for Goodwill A/c
31,500
 
 
Samir’s Capital A/c
60,000
   
 
97,500
 
97,500
 
 
 
 

Page No 4.68:

Answer:

C is admitted for share

Let the combined share of A, B and C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Distribution of C’s share of Goodwill

C’s share of Goodwill = Rs 14,000



Page No 4.69:

Answer:

Journal Entries

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

A’s Capital A/c

Dr.

 

1,800

 

 

B’s Capital A/c

Dr.

 

1,200

 

 

To Goodwill A/c

 

 

 

3,000

 

(Goodwill written-off)

 

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

40,000

 

 

To C’s Capital A/c

Dr.

 

 

30,000

 

To Premium for Goodwill A/c

 

 

 

10,000

 

(C brought capital and his share of goodwill in cash)

 

 

 

 

 

 

 

 

 

 

Premium for Goodwill

Dr.

 

10,000

 

 

To A’s Capital A/c

 

 

 

5,000

 

To B’s Capital A/c

 

 

 

5,000

 

(Premium for Goodwill distributed)

 

 

 

 

 

 

 

 

 

 

Sacrificing Ratio = Old Ratio − New Ratio

Distribution of Premium for Goodwill C’s share of Goodwill)

Goodwill written-off

Page No 4.69:

Answer:

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Cash A/c

Dr.

 

21,000

 

 

To Premium for Goodwill A/c

 

 

 

21,000

 

(C brought Premium for Goodwill)

 

 

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

21,000

 

 

To A’s Capital A/c

 

 

 

9,000

 

To B’s Capital A/c

 

 

 

12,000

 

(Premium for Goodwill brought by C distributed

between A and B in sacrificing ratio i.e. 3:4)

 

 

 

 

 

 

 

 

 

C’s share = A’s sacrifice + B’s sacrifice



New Ratio is 12:6:7

C’s will bring Premium for Goodwill

Distribution of Premium for Goodwill-

Page No 4.69:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Stock A/c

Dr.

 

60,000

 

 

Debtors A/c

Dr.

 

80,000

 

 

Land A/c

Dr.

 

1,00,000

 

 

Plant and Machinery A/c

Dr.

 

40,000

 

 

To Z’s Capital A/c

 

 

1,30,000

 

To Premium for Goodwill A/c

 

 

1,50,000

 

(Z brought assets for his share of goodwill and Capital)

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

1,50,000

 

 

To X’s Capital A/c

 

 

90,000

 

To Y’s Capital A/c

 

 

60,000

 

(Z’s share of Goodwill distributed between X and Y in sacrificing ratio)

 

 

 

 

 

 

 

 

Working Notes:

WN1

WN2

Distribution of Z’s Goodwill

Page No 4.69:

Answer:

 
Books of...
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
2,36,000
 
    To Premium for Goodwill A/c      
36,000
    To Amit’s Capital A/c      
2,00,000
  (Capital and goodwill brought in by the new partner)        
           
  Premium for Goodwill A/c
Dr.
 
36,000
 
    To Sachin’s Current A/c    
3,600
    To Kapil’s Current A/c      
32,400
  (Goodwill distributed among old partners in their sacrificing ratio)        
           
  Sachin’s Current A/c
Dr.
 
3,600
 
  Kapil’s Current A/c
Dr.
 
32,400
 
     To Bank A/c      
36,000
  (Goodwill withdrawn by the old partners)        
           

Working Notes

Old ratio = 2 : 3New ratio = 3 : 3 : 2Sacrificing ratio = Old ratio - New ratioSacrifice made by Sachin = 25 - 38 = 140Sacrifice made by Kapil = 35 - 38 = 940Sacrificing ratio = 1 : 9

Page No 4.69:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Cash A/c

Dr.

 

13,000

 

 

To C’s Capital A/c

 

 

10,000

 

To Premium for Goodwill A/c

 

 

3,000

 

(C brought capital and Premium for Goodwill)

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

3,000

 

 

To A’s Capital A/c

 

 

3,000

 

(Premium for Goodwill transferred to A’s Capital)

 

 

 

 

 

 

 

 

 

A’s Capital A/c

Dr.

 

3,000

 

 

To Cash A/c

 

 

 

3,000

 

(Premium for Goodwill withdrawn)

 

 

 

 

 

 

 

 

Working Notes:

Calculation of Sacrificing Ratio

Here only A is sacrificing his share of profit in favour of C. Hence, A will get the whole amount of premium for goodwill.

Page No 4.69:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Cash A/c

Dr.

 

24,000

 

 

To Shyam’s Capital A/c

 

 

15,000

 

To Premium for Goodwill A/c

 

 

9,000

 

(Shyam brought capital and his share of goodwill

in cash)

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

9,000

 

 

To Prabhu’s Capital A/c

 

 

4,500

 

To Sat Kumar’s Capital A/c

 

 

4,500

 

(Goodwill brought by Shyam distributed between Prabhu and Sat Kumar i.e. 1:1)

 

 

 

 

 

 

 

 

 

Prabhu’s Capital A/c

Dr.

 

4,500

 

 

Sat Kumar’s Capital A/c

Dr.

 

4,500

 

 

To Cash A/c

 

 

 

9,000

 

(Amount of Premium for Goodwill withdrawn by Prabhu and Sat Kumar’s)

 

 

 

 

 

 

 

 

 

 

Calculation of Future (New) Profit Sharing Ratio

Shyam admitted for share of profit

Let combined share of all partners after Shyam’s admission = 1

Combined share Phrabhu and Sat Kumar after Shyam’s admission

Page No 4.69:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c (60% of 25,000)
Dr.
 
15,000
 
    To Premium for Goodwill A/c      
15,000
  (Goodwill brought in by the new partner)        
           
  Premium for Goodwill A/c
Dr.
 
15,000
 
    To A’s Capital A/c      
10,000
    To B’s Capital A/c      
5,000
  (Goodwill distributed in among old partners in their sacrificing ratio)        
           
  C’s Current A/c (40% of 25,000)
Dr.
 
10,000
 
    To A’s Capital A/c      
6,667
    To B’s Capital A/c      
3,333
  (Amount of goodwill not brought by new partner debited from current account and distributed among old partners in their sacrificing ratio)      

Working Notes

Old ratio = 3 : 2

A's new share = 35 - 16 = 1330 or 2660B's new share = 25 - 112 = 1960C's new share = 14 or 1560New profit sharing ratio = 26 : 19 : 15Sacrificing ratio = Old ratio - New ratioSacrifice made by A = 35 - 2660 = 1060Sacrifice made by B = 25 - 1960 = 560Sacrificing ratio = 10 : 5 or 2 : 1

Page No 4.69:

Answer:

Journal
Date Particulars L.F. Debit
Amount
Rs
Credit
Amount
Rs
         
  Cash A/c Dr.   10,000  
  To Premium for Goodwill A/c     10,000
  (C brought premium for Goodwill)      
         
  Premium for Goodwill A/c Dr.   10,000  
  To A’s Capital A/c     6,667
  To B’s Capital A/c     3,333
  (Premium for Goodwill distributed in sacrificing Ratio)      
         
  C’s Current A/c Dr.   6,000  
  To A’s Capital       4,000
  To B’s Capital     2,000
  (Out of the share of goodwill Rs 6,000 not brought by C, and charged from his capital account and distributed)      
         

Working Notes:
WN1

 
WN2
 Distribution of Premium for Goodwill

 
WN3
 Distribution of Goodwill charged from C’s Capital Account



Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
80,000
 
    To C’s Capital A/c      
80,000
  (Capital brought in by new partner)        
           
  C’s Current A/c 60,000×18
Dr.
 
7,500
 
    To A’s Capital A/c      
3,750
    To B’s Capital A/c      
3,750
  (Amount of goodwill not brought by new partner debited from his current account and distributed among old partners in their sacrificing ratio)      
           

Working Notes

Old ratio = 5 : 3

New ratio = 9 : 5 : 2

Sacrifice made by A = 58 - 916 = 116Sacrifice made by B = 38 - 516 = 116Sacrificing ratio = 1 : 1

Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
3,30,000
 
 
To D’s Capital A/c
     
1,20,000
 
To E’s Capital A/c
     
1,20,000
 
To Premium for Goodwill A/c
     
90,000
 
(Capital and goodwill brought in by the new partners)
       
           
  E’s Current A/c
Dr.
 
45,000
 
  C’s Capital A/c 5,40,000×460
Dr.
 
36,000
 
  Premium for Goodwill A/c
Dr.
 
90,000
 
     To A’s Capital A/c      
1,35,000
 
To B’s Capital A/c
     
36,000
  (Amount of goodwill not brought by new partners debited from their capital account and distributed among old partners in their sacrificing ratio)        
           

Working Notes

Old ratio = 5 : 4 : 1

New ratio = 3 : 4 : 2 : 2 : 1

Sacrificing ratio = Old ratio – New ratio

Sacrifice made by A = 510 - 312 = 1560Sacrifice made by B = 410 - 412 = 460Sacrifice made by C = 110 - 212 = - 460(gain)

Sacrificing ratio = 15 : 4

Value of Firm's Goodwill = D's Share of Goodwill × Reciprocal of his Profit ShareValue of Firm's Goodwill = 90,000 × 122 = Rs 5,40,000

Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
80,000
 
 
To Z’s Capital A/c
     
80,000
  (Capital brought in by new partner)        
           
  Z’s Current A/c
Dr.
 
20,000
 
     To X’s Capital A/c      
10,000
 
To Y’s Capital A/c
     
10,000
  (Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio)      
           

Since, nothing has been specified about the new profit sharing ratio, thus, it has been assumed that sacrificing ratio is same as old ratio, i.e. 1 : 1.

Working Notes

Total capital of the new firm = Capital of incoming partner × Reciprocal of his profit shareTotal capital of the new firm = 80,000 × 51 = 4,00,000Combined Capital of X, Y and Z = 1,30,000 + 90,000 + 80,000 = 3,00,000Value of Firm's Goodwill = 4,00,000 - 3,00,000 = 1,00,000Z's Share in Goodwill = 1,00,000 × 15 = 20,000

Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
  C’s Current A/c
Dr.
 
10,000
 
     To A’s Capital A/c      
6,000
 
To B’s Capital A/c
     
4,000
  (Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio.)      

Since, nothing has been specified about new profit sharing ratio, it is assumed that sacrificing ratio is same as the old ratio.

Working Notes

Total capital of the new firm = Capital of incoming partner × Reciprocal of his profit shareTotal capital of the firm=50,000 × 41 = 2,00,000Capital of A, B and C=A' Capital A/c + B's Capital A/c + C's Capital A/c + Reserves + Profit and Loss  A/c - Advertisement expenditure=30,000 + 20,000 + 50,000 + 50,000 + 11,000 -1,000= 1,60,000Goodwill of the firm=2,00,000 - 1,60,000 = Rs 40,000C's Share in Goodwill=40,000 × 14 = 10,000

Page No 4.70:

Answer:

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + Undistributed Profit + Z’s Capital

Total Capital of the firm after Z’s admission = 50,000 + 50,000 + 40,000 + 80,000

Total Capital of the firm after Z’s admission = Rs 2,20,000


Share of Goodwill of Z: Rs 25,000 1,00,000×14

Z’s Current A/c Dr. 25,000  
  To X’s Capital A/c   12,500
  To Y’s Capital A/c   12,500
     

Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Cash A/c
Dr.
 
50,000
 
    To Premium for Goodwill A/c      
50,000
  (Goodwill amount brought in by new partner)        
           
  Premium for Goodwill A/c
Dr.
 
50,000
 
  C’s Current A/c
Dr.
 
40,000
 
 
To A’s Capital A/c
     
45,000
 
To B’s Capital A/c
     
45,000
  (Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio)      
           
  A’s Capital A/c
Dr.
 
80,000
 
  B’s Capital A/c
Dr.
 
80,000
 
 
To Goodwill A/c
     
1,60,000
  (Goodwill written-off between old partners)      
           

Note: Since no information about new ratio is given, it is assumed that old partners will sacrifice in their old ratio.

Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
39,600
 
    To C’s Capital A/c      
30,000
    To Premium for Goodwill A/c      
9,600
  (Capital and goodwill brought in by the new partner)        
           
  Premium for Goodwill A/c
Dr.
 
9,600
 
    To A’s Capital A/c    
7,200
 
To B’s Capital A/c
   
2,400
  (Goodwill distributed among old partners in their sacrificing ratio)      
           
  A’s Capital A/c
Dr.
 
3,000
 
  B’s Capital A/c
Dr.
 
1,000
 
 
To Goodwill A/c
     
4,000
  (Goodwill written off between old partners)      

Working Notes

WN 1: Calculation of Sacrificing Ratio

Old ratio = 3 : 1New ratio = 3 : 1 : 1Sacrificing ratio = Old ratio - New ratioSacrifice made by A = 34 - 35 = 320Sacrifice made by B = 14 - 15 = 120Sacrificing ratio = 3 : 1


WN 2: Calculation of Goodwill

Total Profit = 15,000 + 12,000 + 18,000 + 19,000 = 64,000

Average Profit for 4 years =Total Profit4

Average Profit =64,0004=16,000

Goodwill = Average profit for 4 years × Numbers of Years’ purchase

Goodwill = 16,000 × 3 = 48,000

Cs Share of goodwill=15× 48,000= 9,600

Page No 4.70:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
50,000
 
    To W’s Capital A/c      
50,000
 
(Capital amount brought in by new partner)
       
           
  W’s Current A/c
Dr.
 
15,000
 
    To X’s Capital A/c    
2,500
 
To Y’s Capital A/c
   
5,000
 
To Z’s Capital A/c
     
7,500
  (Amount of goodwill not brought by new partner debited from his capital account and distributed in old partners in their sacrificing ratio.)        
           
  X’s Capital A/c
Dr.
 
10,000
 
  Y’s Capital A/c
Dr.
 
20,000
 
  Z’s Capital A/c
Dr.
 
30,000
 
 
To Goodwill A/c
     
60,000
  (Old goodwill written off among old partners in their old ratio)        

Working Notes

Goodwill = Average profit for 3 years

Total Profit = 62,500 + 70,000 + 92,500 = 2,25,000

Average Profit =Total Profit for 3 Years3

Average Profit =2,25,0003=75,000

Goodwill = Rs 75,000

W's Share of goodwill=75,000 × 15=15,000

Note: As no information about new profit sharing ratio is given, it is assumed that old ratio is the sacrificing ratio. Since Z is not bringing any goodwill, his Current A/c will be debited.



Page No 4.71:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
5,15,200
 
    To B’s Capital A/c    
4,81,600
    To Premium for Goodwill A/c    
33,600
  (Capital and goodwill brought in by new partner)      
         
  Premium for Goodwill A/c
Dr.
 
33,600
 
    To A’s Capital A/c    
33,600
  (Goodwill given to A brought in by B)      

Working Notes

Goodwill = Average Profit for 5 Years’ × Numbers of Years’ Purchase

Average Profit=Total Profit5

Total Profit = (8,000) + 20,800 + 27,200 + 32,000 + 40,000 = 1,12,000

Average Profit=1,12,0005=22,400Goodwill=22,400 × 3 = 67,200

B's share of Goodwill = 67,200 ×12=33,600

Calculation of A’s Capital

= Opening Balance of his Capital + 5 Years’ Profit+ A’s Share of Goodwill – Drawings

= 4,00,000 + 1,12,000 + 33,600 – 64,000= 4,81,600

Page No 4.71:

Answer:

(i)

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
20,000
 
    To Premium for Goodwill A/c    
20,000
  (Goodwill brought in by new partner in cash)      
         
  Premium for Goodwill A/c
Dr.
 
20,000
 
    To A’s Capital A/c    
18,000
    To B’s Capital A/c    
2,000
  (Goodwill distributed among old partners in their sacrificing ratio)      
         
  A’s Capital A/c Dr.  
24,000
 
  B’s Capital A/c Dr.  
16,000
 
     To Goodwill A/c    
40,000
  (Old Goodwill written off among old partners in their old ratio)      

Working Notes

Old ratio = 3 : 2

New ratio = 3 : 3 : 2

Sacrificing ratio = Old ratio – New ratio

Sacrifice made by A = 35 - 38 = 940Sacrifice made by B = 25 - 38 = 140

Sacrificing ratio = 9 : 1

(ii)
 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
1,000
 
    To Premium for Goodwill A/c    
1,000
  (Goodwill brought in by new partner in cash)      
         
  Premium for Goodwill A/c
Dr.
 
1,000
 
  C’s Current A/c
Dr.
 
1,000
 
    To A’s Capital A/c    
1,000
    To B’s Capital A/c    
1,000
  (Goodwill distributed among old partners in their sacrificing ratio)      
         
  A’s Capital A/c Dr.  
3,000
 
  B’s Capital A/c Dr.  
3,000
 
     To Goodwill A/c    
6,000
  (Old Goodwill written off among old partners in their old ratio)      

Page No 4.71:

Answer:

WN1: Calculation of Rao’s share of Goodwill

Rao's Share of Goodwill=30,000×14=7,500

WN2: Adjustment of Rao’s share of Goodwill

Murty will get=7,500×35=4,500Rao will get=7,500×25=3,000

(a) Where there is no Goodwill Account

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Rao’s Capital A/c

Dr.

 

7,500

 

 

To Murty’s Capital A/c

 

 

4,500

 

To Shah’s Capital A/c

 

 

3,000

 

(Rao’s share of goodwill charged from his capital account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

 

 

 

 

 

 

 

 

(b) Goodwill appears at Rs 10,000

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Murty’s Capital A/c

Dr.

 

6,000

 

 

Shah’s Capital A/c

Dr.

 

4,000

 

 

To Goodwill A/c

 

 

10,000

 

(Goodwill written-off at the time of Rao’s admission in old ratio)

 

 

 

 

 

 

 

 

 

Rao’s Capital A/c

Dr.

 

7,500

 

 

To Murty’s Capital A/c

 

 

4,500

 

To Shah’s Capital A/c

 

 

3,000

 

(Rao’s share of goodwill charged from his Capital Account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

 

 

 

 

 

 

 

 

 

Page No 4.71:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Revaluation A/c
Dr.
 
16,000
 
 
  To Machinery A/c
   
16,000
  (Machinery value has reduced)      
         
  Building A/c
Dr.
 
40,000
 
 
  To Revaluation A/c
   
40,000
  (Building account appreciated)      
         
  Revaluation A/c
Dr.
 
4,000
 
 
  To Provision for Doubtful Debts A/c
   
4,000
  (Provision created against debtors)      
         
  Revaluation A/c Dr.  
12,000
 
 
  To Provision for Warranty Claims A/c
   
12,000
  (Created provision against warranty claims)      
         

Page No 4.71:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
  Investments A/c
Dr.
 
20,000
 
 
  To Revaluation A/c
   
20,000
  (Investment value increased due to unrecorded investment)      
         
  Revaluation A/c
Dr.
 
5,000
 
 
  To Creditors A/c
   
5,000
  (Creditors increased by 5,000 due to unrecorded liability)      
         
  Sundry Creditors A/c
Dr.
 
1,600
 
 
  To Revaluation A/c
   
1,600
  (Liability for creditors reduced to the extent of 1,600)      
         

Page No 4.71:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

General Reserve A/c

Dr.

 

4,000

 

 

Revaluation A/c

Dr.

 

2,000

 

 

To A’S Capital A/c

 

 

4,500

 

To B’s Capital A/c

 

 

1,500

 

(Profit on Revaluation and General Reserve distributed between A and B in old ratio)

 

 

 

 

 

 

 

 

Working Note:



Page No 4.72:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Creditors A/c

Dr.

 

5,000

 

 

Building A/c

Dr.

 

40,000

 

 

Investments A/c

Dr.

 

15,000

 

 

To Revaluation A/c

 

 

60,000

 

(Increase in assets and decrease in liabilities transferred to Revaluation Account)

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

10,000

 

 

To Provision for Doubtful Debts A/c

 

 

5,000

 

To Reserve for outstanding Repairs Bill A/c

 

 

2,000

 

To Creditors A/c

 

 

3,000

 

(Increase in liabilities and creation of reserves and provisions transferred to Revaluation Account)

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

50,000

 

 

To Old Partners’ Capital A/c

 

 

50,000

 

(Profit on Revaluation transferred to Partners’ Capital)

 

 

 

 

 

 

 

 

Page No 4.72:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Profit and Loss Adjustment A/c

Dr.

 

1,750

 

 

To Stock A/c

 

 

500

 

To Plant and Machinery A/c

 

 

875

 

To Reserve for Doubtful Debts A/c

 

 

375

 

(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account)

 

 

 

 

 

 

 

 

 

Building A/c

Dr.

 

2,500

 

 

To Profit and Loss Adjustment A/c

 

 

2,500

 

(Increase in value of Building of transferred to Profit and loss Adjustment Accounts)

 

 

 

 

 

 

 

 

 

Profit and Loss Adjustment A/c

 

750

 

 

To A’s Capital A/c

 

 

500

 

To B’s Capital A/c

 

 

250

 

(Profit on revaluation of asset and liabilities distributed between A and B in their old ratio)

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

10,500

 

 

To C’s Capital A/c

 

 

7,500

 

To Premium for Goodwill A/c

 

 

3,000

 

(C brought capital and share of goodwill)

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

3,000

 

 

To A’s Capital A/c

 

 

2,000

 

To B’s Capital A/c

 

 

1,000

 

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

 

 

 

 

 

 

 

 

 

Profit and Loss Adjustment Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

500

 

 

Plant and Machinery

875

Building

2,500

Reserve for Doubtful Debts

375

 

 

Profit transferred to

 

 

 

A Capital

500

 

 

B Capital

250

 

 

 

2,500

 

2,500

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

 

 

 

 

Balance b/d

15,000

10,000

 

 

 

 

 

Cash

 

 

7,500

 

 

 

 

Premium for Goodwill

2,000

1,000

 

Balance c/d

17,500

11,250

7,500

Profit and Loss Adjustment (Profit)

500

250

 

 

17,500

11,250

7,500

 

17,500

11,250

7,500

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2016 after admission of C

Liabilities

Amount

Rs

Assets

Amounts

Rs

 

 

 

 

Capital Accounts:

 

Building (25,000 + 2,500)

27,500

A

17,500

 

Plant and Machinery (17,500 – 875)

16,625

B

11,250

 

Stock (10,000 – 500)

9,500

C

7,500

36,250

 

 

Sundry Creditors

32,950

Sundry Debtors

4,850

 

 

 

Less: Provision for D. Debts

375

4,475

 

 

Cash in Hand (600 + 10,500)

11,100

 

69,200

 

69,200

 

 

 

 

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill (in sacrificing ratio)

WN3

Distribution of Profit from Profit and loss Adjustment Account (in old ratio)

Page No 4.72:

Answer:

 
Books of ….
 
Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit Amount
Rs
  Bank A/c
Dr.
 
2,50,000
 
      To C’s Capital A/c    
2,00,000
      To Premium for Goodwill A/c    
50,000
  (Capital and Goodwill brought in by new partner)      
         
  Premium for Goodwill A/c
Dr.
 
50,000
 
      To A’s Capital A/c    
25,000
      To B’s Capital A/c    
25,000
  (Goodwill distributed among old partners in their sacrificing ratio, i.e. 1 : 1)      
         
  A’s Capital A/c Dr.  
25,000
 
  B’s Capital A/c Dr.  
25,000
 
     To Cash A/c    
50,000
  (Goodwill brought in by C is withdrawn by old partners)      
         
  Revaluation A/c (10,000 – 5,000) Dr.  
5,000
 
     To Provision for Doubtful Debts    
5,000
  (Created provision against debtors)      
         
  Revaluation A/c Dr.  
32,500
 
    To Machinery A/c    
20,000
    To Furniture A/c    
12,500
  (Value of machinery and furniture has depreciated)      
         
  Stock A/c Dr.  
30,000
 
    To Revaluation A/c    
30,000
  (Value of stock has reduced)      
         
  Building A/c Dr.  
1,47,000
 
    To Revaluation A/c    
1,47,000
  (Value of building has appreciated by 20%)      
         
  Investments A/c Dr.  
20,000
 
     To Revaluation A/c    
20,000
  (Value of investments has increased due to unrecorded investments)      
         
  Revaluation A/c Dr.  
1,59,500
 
     To A’s Capital A/c    
79,750
     To B’s Capital A/c    
79,750
  (Revaluation profit distributed among old partners in their old ratio)      
 
Balance Sheet
as on March 31, 2016 after C’s admission
Liabilities
Amount
Rs
Assets
Amount
Rs
       
Sundry Creditors
6,50,000
Sundry Debtors
2,00,000
 
Outstanding Expenses
30,000
  Less: Provision for Doubtful debts
10,000
1,90,000
Capital A/c:   Stock
2,30,000
  A 6,79,750   Furniture (1,00,000 – 12,500)
87,500
  B
4,79,750
  Investments
20,000
  C
2,00,000
13,59,500
Machinery (1,80,000 – 20,000)
1,60,000
    Building (7,35,000 + 1,47,000)
8,82,000
    Cash at Bank
4,70,000
 
20,39,500
 
20,39,500
       

Working Notes
Partners’ Capital Accounts
Dr.  
Cr.
Particulars
A
B
C
Particulars
A
B
C
               
Bank A/c
25,000
25,000
  Balance b/d
6,00,000
4,00,000
 
        Bank A/c    
2,00,000
        Revaluation A/c
79,750
79,750
 
Balance c/d
6,79,750
4,79,750
2,00,000
Premium for Goodwill A/c
25,000
25,000
 
               
 
7,04,750
5,04,750
2,00,000
 
7,04,750
5,04,750
2,00,000
               
 
Cash at Bank Account
Dr.  
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
       
Balance b/d
2,70,000
A’s Capital A/c
25,000
C’s Capital A/c
2,00,000
B’s Capital A/c
25,000
Premium for Goodwill A/c
50,000
Balance c/d
4,70,000
       
 
5,20,000
 
5,20,000
       



Page No 4.73:

Answer:

Revaluation Account
Dr.  
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
       
Stock A/c
6,250
Provision for Doubtful Debts A/c
18,750
Plant and Machinery A/c
21,250
Loss transferred to:  
    X’s Capital A/c 5,250  
    Y’s Capital A/c 3,500
8,750
 
27,500
 
27,500
       
 
Cash at Bank Account
Dr.  
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
       
Balance b/d
1,50,000
Balance c/d
4,89,250
Premium for Goodwill A/c
89,250
   
Samir’s Capital A/c
2,50,000
   
 
4,89,250
 
4,89,250
       
 
Partners’ Capital Accounts
Dr.  
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
               
Revaluation A/c
5,250
3,500
  Balance b/d
3,75,000
1,87,500
 
        Bank A/c    
2,50,000
Balance c/d
4,14,375
2,28,625
2,50,000
Premium for Goodwill A/c
44,625
44,625
 
               
 
4,19,625
2,32,125
2,50,000
 
4,19,625
2,32,125
2,50,000
               
 
Balance Sheet
as on April 01, 2016 after Z’s admission
Liabilities
Amount
Rs
Assets
Amount
Rs
       
Sundry Creditors
1,87,500
Debtors
2,50,000
 
Bills Payable
1,00,000
  Less: Provision for Doubtful Debts
6,250
2,43,750
Outstanding Rent
25,000
Stock (62,500 – 6,250)
56,250
Capital A/cs:   Plant and Machinery (4,25,000 – 21,250)
4,03,750
  X
4,14,375
  Prepaid Expenses
12,500
  Y
2,28,625
  Cash at Bank
4,89,250
  Z
2,50,000
8,93,000
   
 
12,05,500
 
12,05,500
       

Working Notes

WN 1:Calculation of Sacrificing Ratio

Old ratio = 3 : 2New profit sharing ratio = 5 : 3 : 2Sacrificing ratio = Old ratio - New ratioSacrifice made by X = 35 - 510 = 110Sacrifice made by Y = 25 - 310 = 110Sacrificing ratio = 1 : 1

WN 2:Calculation of Hidden Goodwill

Z brings 2,50,000 as his capital for 210 share in profitsTotal Capital of the New Firm = 2,50,000 × 102 = Rs 12,50,000

Capital at the time of Z's admission=X's Capital A/c + Y's Capital A/c  + Z's Capital A/c - Revaluation Loss=3,75,000 + 1,87,500 + 2,50,000 - 8,750 = 8,03,750Goodwill of the Firm = 12,50,000 - 8,03,750 = 4,46,250Z's Share of Goodwill = 4,46,250 ×210=89,250

Page No 4.73:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

Cash A/c

Dr.

 

20,880

 

 

To C’s Capital A/c

 

 

15,000

 

To Premium for Goodwill A/c

 

 

5,880

 

(C brought capital and share of goodwill)

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

5,880

 

 

To A’s Capital A/c

 

 

3,528

 

To B’s Capital A/c

 

 

2,352

 

(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

 

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

 

 

 

 

Balance b/d

51,450

36,750

 

 

 

 

 

Cash

 

 

15,000

Balance c/d

54,978

39,102

15,000

Premium for Goodwill

3,528

2,352

 

 

54,978

39,102

15,000

 

54,978

39,102

15,000

 

 

 

 

 

 

 

 

 

Balance Sheet

after Admission of C

Liabilities

Amount

Rs

Assets

Amount

Rs

 

 

 

 

Capital:

 

Cash (1,500 + 20,880)

22,380

A

54,978

 

Stock

28,000

B

39,102

 

Debtors

19,500

C

15,000

1,09,080

Furniture

2,500

Creditors

 

11,800

Machinery

48,500

 

 

1,20,880

 

1,20,880

 

 

 

 

 

Calculation of New Profit Sharing Ratio

C is admitted for share of profit

Let combined share of all partners after admission of C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

Working Note-

WN1

WN2



Page No 4.74:

Answer:

Profit and Loss Adjustment Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

 

 

 

 

Stock

1,800

Building

15,000

Furniture

440

 

 

Provision for Doubtful Debts

275

 

 

Profit transferred to

 

 

 

Shyamlal Capital

4,994

 

Sanjay Capital

7,491

12,485

 

 

15,000

 

15,000

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

 

Cr.

Particulars

Shyamlal

Sanjay

Shanker

Particulars

Shyamlal

Sanjay

Shanker

 

 

 

 

Balance b/d

34,050

34,050

 

 

 

 

 

Cash A/c

 

 

30,000

 

 

 

 

Premium for Goodwill

8,000

12,000

 

Balance c/d

47,044

53,541

30,000

Revaluation

4,994

7,491

 

 

47,044