Answer each of the following questions briefly:                                                          [10 × 2 = 20 Marks]

(i) Define joint venture.
(ii) State the provisions of the Partnership Act, 1932, in the absence of a Partnership Deed regarding
(iii) State the complete accounting treatment of hidden goodwill at the time of admission of a partner.
(iv) Why are assets revalued and liabilities reassessed when there is a change in profit sharing ratio amongst the partners?
(v) State two differences between dissolution of partnership and dissolution of firm.
(vi) Why is a memorandum balance sheet prepared at the time of dissolution of a partnership firm?
(vii) State two similarities between calls in arrear account and calls in advance account.
(viii) What is the accounting treatment when shares are issued to promoters for consideration other than cash?
(ix) Differentiate between Joint Venture account and JV with ..... account.
(x) Mention the name and explain the part of capital of a company which is called up only on its winding up. VIEW SOLUTION

Brian and Derek entered into a joint venture agreement sharing profits and losses equally. Brian purchased 10,000 litres of oil @ Rs 40 per litre and incurred freight and insurance amounting to Rs 10,000. The goods were sent to Derek to be sold in the market. Derek incurred Rs 5,000 on duty and Rs 3,000 on godown rent. During transit, 100 litres were stolen against which Brian received an insurance claim of Rs 3,000. Derek took delivery of the remaining consignment and sold 7,000 litres @ Rs 50 per litre.

[10 Marks]

Finally, Derek took over the closing stock for business use.

Assume a normal loss of 10 litres due to leakage and evaporation.

You are required to prepare the Joint Venture Account and Derek’s account in the books of Brian assuming both coventurers maintain all accounts.

Note: All calculations are to be made to the nearest rupee. VIEW SOLUTION

The capital accounts of Adam and Batty stood at Rs 40,000 and Rs 30,000 respectively after the necessary adjustments in respect of the drawings and the net profit for the year ended 31st December 2011. It was subsequently ascertained that interest on capital and on drawings @ 5% per annum were not taken into account in arriving at the divisible profits for the year.

[10 Marks]

            
The drawings of the partners had been: Adam – Rs 1,200 drawn at the end of each quarter and Batty – Rs 1,800 drawn at the end of each half year.

The net profit for the year amounted to Rs 20,000. The partners share profits and losses in the ratio of 3 : 2.

You are required to pass the necessary journal entries to rectify the lapse in accounting and also prepare the adjusted capital accounts of the partner. VIEW SOLUTION

Following is the Balance Sheet of John and Jimmy as on 31^st December 2010:                                                 [10 Marks]
 

Liabilities	Amount Rs	Assets	Amount Rs
John’s capital	50,000	Goodwill	6,000
Jimmy’s capital	35,000	Land and building	40,000
Reserve	6,000	Furniture	3,750
Creditors	25,000	Stock	25,000
		Debtors	20,000
		Investments	15,250
		Bank	4,500
		Cash	1,500
	1,16,000		1,16,000

The partners shared profits and losses in the ratio of 2:1. From 1^st January, 2011. They agreed to share profit and losses equally. For this purpose, the following particulars are provided:

(a) Land and building are to be appreciated by 25%.

(b) Furniture valued at Rs 3,250.

(c) Market value of stock is Rs 22,500.

(d) A provision for bad debts @ 5% is to be created on debtors.

(e) Goodwill is valued at Rs 15,000.

Show the revised Balance Sheet of the firm as on 1^st January, 2011 along with appropriate ledger accounts as proper working notes. VIEW SOLUTION

Henry, Jacob and Jackson are partners in a firm. Their Balance Sheet as on 31^st December 2011, stood as follows:                                [10 Marks]
 

Liabilities	Amount Rs	Assets	Amount Rs
Henry’s capital	2,00,000	Plant and machinery	2,00,000
Jacob’s capital	1,50,000	Furniture and fixtures	25,000
Jackson’s capital	40,000	Stock	1,05,000
General reserve	1,00,000	Debtors	1,50,000
Creditors	1,00,000	Investments	1,20,000
	5,90,000*		6,00,000*

The partnership deed provides that the representatives of the deceased partner shall be entitled to:

(a) Deceased partner’s capital as appearing in the last balance sheet.

(b) Interest on capital @ 6% per annum up to date of death.

(c) His share of profit up to date of death on the average of last three years’ divisible profit.

(d) His share of goodwill valued at two years’ purchase of the average divisible profit of last three years.

(e) His share of any undistributed profits and losses as per last drawn balance sheet.

(f) Interest on drawings up to date of death will be charged @ 10% per annum.

(g) Assets and liabilities of the firm on the date of death will be revalued and reassessed respectively by an independent valuer.

Jacob died on 30^th June, 2012 and the valuer appointed by Henry and Jackson with the consent of the legal heirs of Jacob recommended as follows:

(i) Plant and Machinery to be depreciated by 5%.

(ii) Furniture and fixtures to be taken at Rs 20,000.

(iii) Stock to be reduced by 10%.

(iv) A provision of $2\frac{1}{2}\%$ is to be raised against debtors for doubtful debts.

(v) The investments are to be valued at Rs 1,50,000.

The divisible profits for the last three years were Rs 6,50,000 Rs 6,40,000 and Rs 6,90,000.

Jacob’s drawings up to the date of death amounted to Rs 1,00,000.

Finally, it was decided to transfer the amount due, to Jacob’s executor’s loan account.

You are required to prepare the revaluation account, partners’ capital accounts and the balance sheet.

Note: All calculations are to be made to the nearest rupee.

*The total of Balance Sheet given in the question does not match. VIEW SOLUTION

Mathew, Clarke and Adolf are partners sharing profits and losses in the proportion to their capitals, which on 31st December 2011 stood at Rs 3,00,000, Rs 2,00,000 and Rs 1,00,000 respectively. The firm’s liabilities on that date amounted to Rs 3,00,000 apart from a contingent liability of Rs 60,000 not so far brought into the books, which also matured for payment. In addition, Adolf had loaned Rs 80,000 to the firm on which he was entitled to receive interest on loan @ 6% per annum for the whole year.

[10 Marks]

They dissolved the partnership on 31st December, 2011 and the assets realized Rs 14,40,000.

You are required to close the books of the firm.

Note: All calculations are to be made to the nearest rupee. VIEW SOLUTION

Norton and Company Limited make an issue of 10,000 equity shares of Rs10 each payable as follows:                         [10 Marks] Applications were received for 12,000 shares and the directors refunded the excess application money. One shareholder who was allotted 20 shares paid first and final call with allotment money and another shareholder did not pay allotment money on his 30 shares but which he paid with first and final call. Directors have decided to charge and allow interest, as the case may be, on calls in arrear and calls in advance respectively according to the provisions of Table-A of the Companies Act 1956. Journalise the above transactions in the books of the company. VIEW SOLUTION

Parker and Company Limited issued 2,000 15% debentures of Rs 100 each at a premium of 10% on 1st January, 2011.  [10 Marks]
Under the terms of issue: Pass the necessary journal entries for the year 2011. VIEW SOLUTION