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Question
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.
Solution
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 |
|
6,130 |
|
|
|
|
|
|
Mar.31 |
Interest |
|
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 |
|
1,532.5 |
|
|
|
|
|
64,365 |
|
|
|
64,365 |
|
Working Notes:
WN1: Calculation of Profit & Loss Suspense
WN2: Calculation of Gaining Ratio and Share of Goodwill
Z's share of goodwill=`60,000 xx 1/6 = "Rs" 10,000` should be given by Y
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.
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|||
| Creditors |
1,65,000 |
Cash | 1,20,000 | |||
| General Reserve | 90,000 | Debtors | 1,35,000 | |||
| Capitals: | Less: Provision | 15,000 | 1,20,000 | |||
| N | 2,25,000 | Stock | 1,50,000 | |||
| S | 3,75,000 | Machinery | 4,50,000 | |||
| G |
4,50,000 |
10,50,000 |
Patents |
90,000 |
||
| Building | 3,00,000 | |||||
|
|
|
Profit and Loss Account |
75,000 |
|||
|
13,05,000 |
13,05,000 |
|||||
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| General Reserve |
12,000 |
Bank | 7,600 | ||
| Sundry Creditors |
15,000 |
Debtors |
6,000 |
|
|
| Bills Payable |
12,000 |
Less: Provision for Doubtful Debts |
400 |
5,600 |
|
| Outstanding Salary | 2,200 | Stock | 9,000 | ||
| Provision for Legal Damages | 6,000 | Furniture | 41,000 | ||
| Capital A/cs: | Premises | 80,000 | |||
| Pankaj |
46,000 |
|
|||
| Naresh | 30,000 | ||||
| Saurabh |
20,000 |
96,000 |
|||
|
1,43,200 |
1,43,200 |
||||
Additional Information:
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| Liabilities | ₹ | Assets | ₹ | ||
| Capital A/cs: | Land and Building | 4,00,000 | |||
| Kusum | 4,00,000 | Machinery | 6,00,000 | ||
| Sneh | 6,00,000 | Closing Stock | 2,00,000 | ||
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| Workmen Compensation Reserve | 30,000 | Cash at Bank | 2,00,000 | ||
| Sundry Creditors | 1,00,000 | 2,00,000 | |||
| 16,00,000 | 16,00,000 | ||||
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(b) Machinery be depreciated by 30%.
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| Liabilities | ₹ | Assets | ₹ | ||
| Capital A/cs: | Buildings | 2,00,000 | |||
| Virad | 3,00,000 | Machinery | 3,00,000 | ||
| Vishad | 2,50,000 | Patents | 1,10,000 | ||
| Roma | 1,50,000 | 7,00,000 | Stock | 1,00,000 | |
| Reserve Fund | 60,000 | Debtors | 80,000 | ||
| Creditors | 1,10,000 | Cash | 80,000 | ||
| 8,70,000 | 8,70,000 | ||||
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(i) Goodwill of the firm be valued at 212 years purchase of average profits for the last three years. The average profits were ₹ 1,50,000.
(ii) Interest on capital be provided at 10% p.a.
(iii) Profits for the 2013-14 be taken as having accrued at the same rate as that of the previous year which was ₹ 1,50,000.
Prepare Virad's Capital Account to be presented to his Executors as on 1st October, 2013.
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 212 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.
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|
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.
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.
X,Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit A into partnership and give him 1/5th share of profits. Find the new profit-sharing ratio.
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 212 years' purchase of average of four completed years' profits which were: 2014→₹ 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.
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| Year | 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 |
| Profits (₹) | 70,000 | 85,000 | 45,000 | 35,000 | 10,000 (Loss) |
You are required to calculate goodwill and pass journal entry.
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Pass the Journal entry showing the working.
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A and B are partners in a firm sharing profits in the ratio of 4 : 1. They decided to share future profits in the ratio of 3 : 2 w.e.f. 1st April, 2019. On that day, Profit and Loss Account showed a debit balance of ₹ 1,00,000. Pass Journal entry to give effect to the above.
A and B are partners sharing profits and losses in the ratio of 2 : 5. They admit C on the condition that he will bring ₹ 14,000 as his share of goodwill to be distributed between A and B. C's share in the future profits or losses will be 1/4th. What will be the new profit-sharing ratio and what amount of goodwill brought in by C will be received by A and B?
X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when there is a claim of ₹ 80,000 against it.
Balance Sheet of X and Y, who share profits and losses as 5 : 3, as at 1st April, 2019 is:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
| X's Capital | 52,000 | Goodwill | 8,000 |
| Y's Capital | 54,000 | Machinery | 38,000 |
| General Reserve | 4,800 | Furniture | 15,000 |
| Sundry Creditors | 5,000 | Sundry Debtors | 33,000 |
| Employees' Provident Fund | 1,000 | Stock | 7,000 |
| Workmen Compensation Reserve | 10,000 | Bank | 25,000 |
| Advertisement Suspense A/c | 800 | ||
| 1,26,800 | 1,26,800 |
On the above date, they decided to change their profit-sharing ratio to 3 : 5 and agreed upon the following:
(a) Goodwill be valued on the basis of two years' purchase of the average profit of the last three years. Profits for the years ended 31st March, are: 2016-17 − ₹ 7,500; 2017-18 − ₹ 4,000; 2018-19 − ₹ 6,500.
(b) Machinery and Stock be revalued at ₹ 45,000 and ₹ 8,000 respectively.
(c) Claim on account of workmen compensation is ₹ 6,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.
Following is the Balance Sheet of A and B, who shared Profits and Losses in the ratio of 2 : 1, as at 1st April, 2019:
BALANCE SHEET OF A AND B
as on 1st April, 2019
| Liabilities | Amount (₹) |
Assets |
Amount (₹) |
|
| Capital A/cs: | Land ad Building | 2,90,000 | ||
| A | 3,00,000 | Furniture | 80,000 | |
| B | 2,00,000 | 5,00,000 | Stock | 2,40,000 |
| Reserve | 1,50,000 | Debtors | 1,50,000 | |
| Creditors | 2,00,000 | Bank | 60,000 | |
| Cash | 30,000 | |||
| 8,50,000 | 8,50,000 | |||
On the above date, the partners changed their profit-sharing ratio to 3 : 2. For this purpose, the goodwill of the firm was valued at ₹ 3,00,000. The partners also agreed for the following:
(a) The value of Land and Building will be ₹ 5,00,000;
(b) Reserve is to be maintained at ₹ 3,00,000.
(c) The total capital of the partners in the new firm will be ₹ 6,00,000, which will be shared by the partners in their new profit-sharing ratio.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
The incoming partner cannot acquire his share of profits:
At the time of admission of a new partner, Which adjustments are required:
Bakul, Champak and Darshan were partners in the firm sharing profits in the ratio of 5:4:1. The profit of the firm for the year ending on March 31, 2019, was Rs. 1,00,000. Champak dies on June 30, 2019. What is Champak's share of profit for the period from April 1 to June 30, 2019?
For the following particulars, calculate the new profit-sharing of the partners.
Shiv, Mohan and Hari were partners in a firm, sharing profits in the ratio of 5 : 5 : 4. Finally, Mohan retired, and his share was divided equally between Shiv and Hari.
A, B and C are three partners sharing profit and loss in the ratio of 3:2:1. B retires from the firm. Suppose A and C purchase the share of retiring partners equally. What is the new profit sharing ratio?
