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Question
Mahadev, Sukesh, Menon and Thomas were partners in a firm sharing profits in the ratio of 5 : 2 : 2 : 1. On 31st March 2016 their Balance Sheet was as follows:
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Balance Sheet of Mahadev, Sukesh, Menon and Thomas as at 31.3.2016 |
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Liabilities |
Amount (Rs) |
Assets |
Amount (Rs) |
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Capitals: |
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Fixed Assets |
18,00,000 |
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Mahadev |
7,00,000 |
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Current Assets |
6,75,000 |
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Sukesh |
6,00,000 |
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Menon |
5,00,000 |
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Thomas |
4,50,000 |
22,50,000 |
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Sundry Creditors |
1,50,000 |
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Workmen Compensation Reserve |
75,000 |
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24,75,000 |
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24,75,000 |
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From the above data the partners decided to share the future profits in the ratio of 4 : 3 : 2 : 1. For this purpose the goodwill of the firm was valued at Rs 1,20,000. The partners also agreed for the following:
(i) Claims against Workmen Compensation Reserve was estimated at Rs 1,00,000 and Rs 75,000 depreciation on fixed assets was to be provided.
(ii) Capitals of the partners will be adjusted according to the new profit sharing ratio by bringing in or paying off cash as the case may be.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the reconstituted firm.
Solution
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Revaluation Account |
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Dr. |
Cr. |
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Particulars |
Amount (Rs) |
Particulars |
Amount (Rs) |
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Depreciation on Fixed Assets A/c |
75,000 |
Revaluation Loss |
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Provision for Claim against WCF |
25,000 |
Mahadev |
50,000 |
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Sukesh |
20,000 |
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Menon |
20,000 |
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Thomas |
10,000 |
1,00,000 |
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1,00,000 |
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1,00,000 |
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Partners’ Capital Account |
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Dr. |
Cr. |
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Particulars |
Mahadev |
Sukesh |
Menon |
Thomas |
Particulars |
Mahadev |
Sukesh |
Menon |
Thomas |
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Revaluation A/c |
50,000 |
20,000 |
20,000 |
10,000 |
Balance b/d |
7,00,000 |
6,00,000 |
5,00,000 |
4,50,000 |
| Mahadev's Capital A/c | 12,000 |
Sukesh’s Capital A/c |
12,000 |
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|
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Cash A/c |
50,000 | 2,25,000 | Cash A/c | 1,98,000 | 77,000 | ||||
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Balance c/d |
8,60,000 |
6,45,000 |
4,30,000 |
2,15,000 |
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9,10,000 |
6,77,000 |
5,00,000 |
4,50,000 |
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9,10,000 |
6,77,000 |
5,00,000 |
4,50,000 |
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Balance Sheet |
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Liabilities |
Amount (Rs) |
Assets |
Amount (Rs) |
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Capital A/c |
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Fixed Assets (less dep.) |
17,25,000 |
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Mahadev |
8,60,000 |
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Current Assets |
6,75,000 |
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Sukesh |
6,45,000 |
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Menon |
4,30,000 |
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Thomas |
2,15,000 |
21,50,000 |
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Claim against WCF |
1,00,000 |
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Sundry Creditors |
1,50,000 |
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24,00,000 |
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24,00,000 |
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Notes
Calculation of Gaining/Sacrificing Ratio
Old RatioNew Ratio
5:2:2:1 4:3:2:1
S/R of Mahadev = Old Ratio − New Ratio=`5/10-4/10=1/10`⇒Sacrificing
S/R of Sukesh = Old Ratio − New Ratio=`2/10-3/10=-1/10`⇒Gaining
S/R of Menon = Old Ratio − New Ratio=`2/10-2/10=0`
S/R of Thomas = Old Ratio − New Ratio =`1/10-1/10=0`
Journal entry for Goodwill
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Sukesh’s Capital A/c |
Dr. |
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12,000 |
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To Mahadev’s Capital A/c |
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12,000 |
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(Gaining partner compensate sacrificing partner) |
Calculation of Adjusted Capital
Mahadev = 7,12,000 – 50,000 = Rs 6,62,000
Sukesh = 6,00,000 – 32,000 = Rs 5,68,000
Menon = 5,00,000 – 20,000 = Rs 4,80,000
Thomas = 4,50,000 – 10,000 = Rs 4,40,000
Total Combined Capital = 21,50,000
Calculation of New Capital
Mahadev =`21,50,000xx4/10=8,60,000`
Sukesh=`21,50,000xx3/10=6,45,000`
Menon=`21,50,000xx2/10=4,30,000`
Thomas =`21,50,000xx1/10=2,15,000`
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Assets |
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|
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Balance Sheet of P, Q, R and S as on 1.4.2016 |
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Liabilities |
Amount (Rs) |
Assets |
Amount (Rs) |
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Capitals: |
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Fixed Assets |
12,70,000 |
|
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P |
2,00,000 |
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Current Assets |
5,30,000 |
|
Q |
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|
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|
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R |
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S |
5,00,000 |
14,00,000 |
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| Sundry Creditor | 2,30,000 | |||
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Workmen |
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Compensation Reserve |
1,70,000 |
|
|
|
|
|
18,00,000 |
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18,00,000 |
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Balance Sheet of 'G', 'E' and 'F' as on 31st March, 2011 |
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Liabilities |
Amount Rs |
Assets |
Amount Rs |
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Capitals: |
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Goodwill |
40,000 |
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‘G’ |
70,000 |
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Land & Buildings |
60,000 |
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‘E’ |
20,000 |
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Machinery |
40,000 |
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‘F’ |
10,000 |
1,00,000 |
Stock |
7,000 |
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General Reserve |
20,000 |
Debtors |
12,000 |
|
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Loan from ‘E’ |
30,000 |
Cash |
5,000 |
|
|
Creditors |
14,000 |
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|
|
1,64,000 |
|
1,64,000 |
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|
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Balance Sheet of Sanjay and Sameer as on 31.3.2011 |
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Liabilities |
Amount Rs |
Assets |
Amount Rs |
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Capitals |
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Land and Building |
3,00,000 |
|
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Sanjay: |
2,00,000 |
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Stock |
1,00,000 |
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Sameer: |
3,00,000 |
5,00,000 |
Debtors |
1,50,000 |
|
Creditors |
1,05,000 |
Bank |
1,55,000 |
|
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Workmen compensation Fund |
1,00,000 |
|
|
|
|
|
7,05,000 |
|
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