Advertisements
Advertisements
Question
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.
Solution
Old Ratio (A, B and C) = `1/2 : 2/5 : 1/10 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
APPEARS IN
RELATED QUESTIONS
Explain the modes of payment to a retiring partner.
Nithya, Sathya and Mithya were partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as on March 31, 2015 was as follows:
Books of Nithya, Sathya and Mithya
Balance Sheet at March 31, 2015
|
Liabilities |
Amt (Rs.) |
Assets |
Amt (Rs.) |
||
|
Creditors |
14,000 |
Investments |
10,000 |
||
|
Reserve Fund |
6,000 |
Goodwill |
5,000 |
||
|
Capitals: |
|
Premises |
20,000 |
||
|
Nithya |
30,000 |
|
Patents |
6,000 |
|
|
Sathya |
30,000 |
|
Machinery |
30,000 |
|
|
Mithya |
20,000 |
80,000 |
Stock |
13,000 |
|
|
|
|
Debtors |
8,000 |
||
|
|
Bank |
8,000 |
|||
|
|
1,00,000 |
|
1,00,000 |
||
Mithya dies on August 1, 2015. The agreement between the executors of Mithya and the partners stated that:
(a) Goodwill of the firm be valued at `2 1/2` times the average profits of last four years. The profits of four years were : in 2011-12, Rs 13,000; in 2012-13, Rs 12,000; in 2013-14, Rs 16,000; and in 2014-15, Rs 15,000.
(b) The patents are to be valued at Rs 8,000, Machinery at Rs 25,000 and Premises at Rs 25,000.
(c) The share of profit of Mithya should be calculated on the basis of the profit of 2014-15.
(d) Rs 4,200 should be paid immediately and the balance should be paid in 4 equal half-yearly instalments carrying interest @ 10%.
Record the necessary journal entries to give effect to the above and write the executor’s account till the amount is fully paid. Also prepare the Balance Sheet of Nithya and Sathya as it would appear on August 1, 2015 after giving effect to the adjustments.
