# 12th | Ts grewal 2021-2022 Question 21 to 25 | Retirement of a partner

#### Question 21:

A, B, C and D are partners in a firm sharing profits, in the ratio of 2 : 1 : 2 : 1. On the retirement of C, Goodwill was valued  ` 1,80,000. A, B and D decide to share future profits equally. Pass the necessary Journal entry for the treatment of goodwill.

 Journal Date Particulars L.F. Debit Amount (`) Credit Amount (`) B’s Capital A/c Dr 30,000 D’s Capital A/c Dr. 30,000 To C’s Capital A/c 60,000 (Being Adjustment of C’s share of goodwill)

Working Notes:

WN1:Calculation of Gaining Ratio

A :B :C :D=2:1:2:1(Old ratio)

A :B :D =1:1:1(New ratio)

Gaining Ratio = New Ratio - Old Ratio

A's Gain =1/3−2/6=2−2/6=0

B's Gain =1/3−1/6=2−1/6=1/6

D's Gain =1/3−1/6=2−1/6=1/6

A:B:D=0:1:1

WN2: Calculation of Retiring Partner’s Share of Goodwill
C's share of goodwill=1,80,000×2/6=
` 60,000

C's share of goodwill will be brought by B and D in their gaining ratio1:1

Therefore, B's Capital A/c will be debited with 60,000×1/2=` 30,000

And, D's Capital A/c will be debited with 60,000×1/2=` 30,000

#### Question 22:

A, B and C were partners in a firm sharing profits in the ratio of 6 : 5 : 4. Their capitals were A − ` 1,00,000;   ` 80,000 and  ` 60,000 respectively. On 1st April, 2009, A retired from the firm and the new profit sharing ratio between B and C was decided as 1 : 4. On A's retirement, the goodwill of the firm was valued at ` 1,80,000. Showing your calculations clearly, pass the necessary Journal entry for the treatment of goodwill on A's retirement.

 Journal Date Particulars L.F. Debit Amount (`) Credit Amount (`) C’s Capital A/c Dr. 96,000 To A’s Capital A/c 72,000 To B’s Capital A/c 24,000 (Being Adjustment of A’s and B’s share of goodwill)

Working Notes:

WN1: Calculation of Gaining Ratio

A :B :C=6:5:4(Old ratio)

B :C=1:4 (New ratio)

Gaining Ratio = New Ratio - Old Ratio

B's Gain =1/5−5/15=3−5/15= −2/15(Sacrifice)

C's Gain =4/5−4/15=1/2−4/15=8/15

WN2: Calculation of Retiring Partner’s Share of Goodwill

A's share of goodwill=1,80,000×6/15=` 72,000

B's share of goodwill=1,80,000×2/15=` 24,000

A's and B's share of goodwill be brought by C only.Therefore, C's Capital A/c will be debited with 72,000+24,000 = ` 96,000

#### Question 23:

Sangeeta, Saroj and shanti are partners sharing profits and losses in the ratio of 5 : 3 : 2. Z retired and on the date of his retirement, following adjustments were agreed upon:
(a) The value of Furniture is to be increased by
` 12,000.
(b) The value of stock to be decreased by
` 10,000.
(c) Machinery of the book value of
` 50,000 is to be depreciated by 10%.
(d) A Provision for Doubtful Debts @ 5% is to be created on debtors of book value of
` 40,000.
(e) Unrecorded Investment worth
` 10,000.
(f) An item of
` 1,000 included in bills payable is not likely to be claimed, hence should be written back.
Pass necessary Journal entries.

 Revaluation Account Dr. Cr. Particulars Amount ` Particulars Amount ` Stock A/c 10,000 Furniture A/c 12,000 Machinery A/c 5,000 Investments A/c 10,000 Provision for Doubtful Debts A/c 2,000 Bills Payable A/c 1,000 Profit transferred to: X’s Capital A/c 3,000 Y’s Capital A/c 1,800 Z’s Capital A/c 1,200 6,000 23,000 23,000

 Journal Date Particulars L.F. Debit Amount (`) Credit Amount (`) (a) Furniture A/c Dr. 12,000 To Revaluation A/c 12,000 (Being Increase in value transferred to Revaluation Account) (b) Revaluation A/c Dr. 10,000 To Stock A/c 10,000 (Being Decrease in Stock transferred to Revaluation Account) (c) Revaluation A/c Dr. 5,000 To Machinery A/c 5,000 (Being Decrease in value of machinery transferred to Revaluation Account) (d) Revaluation A/c Dr. 2,000 To Provision for Doubtful Debts A/c 2,000 (Being Increase in liabilities to Revaluation Account) (e) Investments A/c Dr. 10,000 To Revaluation A/c 10,000 (Being Increase in value transferred to Revaluation Account) (f) Bills Payable A/c Dr. 1,000 To Revaluation A/c 1,000 (Being Decrease in liabilities transferred to Revaluation Account) (g) Revaluation A/c Dr. 6,000 To X’s Capital A/c 3,000 To Y’s Capital A/c 1,800 To Z’s Capital A/c 1,200 (Being Revaluation profit transferred to Partners’ Capital Accounts)

#### Question 24:

A, B and C were partners, sharing profits and losses in the ratio of 2 : 2 : 1. B decides to retire on 31st March, 2021. On the date of his retirement, some of the assets and liabilities appeared in the books as follows:
Creditors
` 70,000; Building  ` 1,00,000; Plant and Machinery  ` 40,000; Stock of Raw Materials  ` 20,000; Stock of Finished Goods  ` 30,000 and Debtors  ` 20,000.
Following was agreed among the partners on B's retirement:
(a) Building to be appreciated by 20%.
(b) Plant and Machinery to be reduced by 10%.
(c) A Provision of 5% on Debtors to be created for Doubtful Debts.
(d) Stock of Raw Materials to be valued at
` 18,000 and Finished Goods at  ` 35,000.
(e) An Old Computer previously written off was sold for
` 2,000 as scrap.
` 5,000 to an injured employee.
Pass necessary Journal entries to record the above adjustments and prepare the Revaluation Account.

 Revaluation Account Dr. Cr. Particulars Amount ( `) Particulars Amount ( `) Plant and Machinery (40,000 × 10%) 4,000 Building (1,00,000 × 20%) 20,000 Provision for Doubtful Debts 1,000 Stock of Finished Goods 5,000 Stock of Raw Materials 2,000 Computer 2,000 Workmen’s Compensation Claim 5,000 Profit transferred to: A’s Capital A/c 6,000 B’s Capital A/c 6,000 C’s Capital A/c 3,000 15,000 27,000 27,000

 Journal Particulars L.F. Debit Amount ( `) Credit Amount ( `) Building A/c Dr. 20,000 Stock of Finished Good A/c Dr. 5,000 Computer A/c Dr. 2,000 To Revaluation A/c 27,000 (Being Increase in value Assets transferred to Revaluation Account) Revaluation A/c Dr. 12,000 To Plant and Machinery A/c 4,000 To Provision for Doubtful Debts A/c 1,000 To Stock of Raw Material A/c 2,000 To Workmen’s Compensation Claim A/c 5,000 ((Being Decrease in value of Assets and increase in Liabilities transferred to Revaluation Account) Revaluation A/c Dr. 15,000 To A’s Capital A/c 6,000 To B’s Capital A/c 6,000 To C’s Capital A/c 3,000 ((Being Revalution Profit transferred to Partners’ Capital accounts)

#### Page No 6.58:

Question 25: Punit, Ramit and Akshit were partners sharing profits equally. Akshit retired on 1st April, 2021. Punit and Ramit decided to continue the business and share profits in the ratio of 3: 2. They also decided to give effect to the change in values of assets and liabilities without changing their book values.

The book values and their revised values were as follows:

 Book Values (`) Revised Values (`) Land 5,50,000 8,50,000 Building 2,50,000 2,10,000 Computers 1,00,000 70,000 Computer Softwares 5,00,000 4,00,000 Sundry Creditors 70,000 60,000 Workmen Compensation Claim - 5,000

 Punit Ramit Akshit Old Ratio 1 : 1 : 1 New Ratio 3 : 2 : Retired

Punit = 1/3-3/5=5-9/15= -4/15 (Gain)

Ramit = 1/3-2/5=5-6/15= -1/15 (Gain)

Akshat = 1/3-0/5=5-0/15= 5/15 =1/3 (Sacrifice)

SHARE OF SACRIFICE FOR AKSHAT, RETIRING PARNTER

Sacrificing ratio of Akshat is 1/3

Compensating amount =1,35,,000×1/3=45,000

Share of Compensating amount by Punit and Ramit in sacrificing ratio (4:1)

Punit= 45,000×4/5=36,000

Ramit= 45,000×1/5=9,000

 Particulars Dr. ` Cr. ` Punit’s Capital A/c          Dr. Ronit’s Capital A/c          Dr.     To Akshat’s Capital A/c 36,000 9,000 45,000

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