Double Entry Book Keeping Ts Grewal Volume I 2021-2022 Solutions for Class 12

Commerce Accountancy Chapter 5 - Admission Of A Partner

Page No 5.88:

Question 26:

Adil and Bhavya are partners sharing profits and losses in the ratio of 7 : 5. They admit Cris, their Manager, into partnership who is to get 1/6th share in the business. Cris brings in ` 10,000 for his capital and ` 3,600 for the 1/6th share of goodwill which he acquires 1/24th from Adil and 1/8th from Bhavya. Profits for the first year of the new partnership was ` 24,000. Pass necessary Journal entries for Cris's admission and apportion the profit between the partners.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `

	Cash A/c	Dr.		13,600
	To Cris’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,600
	(Cris brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		3,600
	To Adil’s Capital A/c				900
	To Bhavya’s Capital A/c				2,700
	(Cris’s share of goodwill transferred to Adil and Bhavya in their sacrificing ratio i.e. 3:1)

	Profit and Loss Appropriation A/c	Dr.		24,000
	To Adil’s Capital A/c				13,000
	To Bhavya’s Capital A/c				7,000
	To Cris’s Capital A/c				4,000
	(Profit after Cris’s admission distributed)

Working Note:

WN1

	Adil		Bhavya
Sacrificing Ratio =	1/24	:	1/8
	1	:	3

WN2

Distribution of Cris’s share of Goodwill (in sacrificing ratio)

Adil will get =3,600×1/4=900

Bhavya will get =3,600×3/4=2,700

WN3

Calculation of New Profit Sharing Ratio

New ratio= old ratio – Sacrificing Ratio

	Adil’s	=7/12-1/24
		=13/24
	Bhavya’s	=5/12-1/8
		=7/24
			Adil		Bhavya		Cris
New profit sharing ratio=			13/24	:	7/24	:	1/6
=			13/24	:	7/24	:	4/24
=			13	:	7	:	4

WN4

Distribution of Profit earned after Cris’s admission (in new ratio)

Adil will get =24,000×13/24=13,000

Bhavya will get =24,000×7/24=7,000

Cris will get =24,000×4/24=4,000

Page No 5.88:

Question 27:

Anshul and Parul are partners sharing profits in the ratio of 3 : 2. They admit Payal as partner for 1/4th share in profits on 1st April, 2021. Payal brings `5,00,000 as capital and her share of goodwill by cheque. It was agreed to value goodwill at three years' purchase of average profit of last four years.

Profits for the last four years ended 31st March, were	`
2018	4,00,000
2019	5,00,000
2020	6,00,000
2021	7,00,000

Additional Information:
1. Closing Stock for the year ended 31st March, 2020 was overvalued by ` 50,000.
2. ` 1,00,000 should be charged annually to cover management cost.

Pass necessary Journal entries on Payal's admission.

Answer:

In the books of the Anshul, Parul and Payal Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2021
April 01	Bank A/c	Dr.		8,37,500
	To Payal’s Capital A/c				5,00,000
	To Premium for Goodwill A/c				3,37,500
	(Being capital and goodwill paid by the new partner)

2021	Premium for Goodwill A/c	Dr.		3,37,500
April 01	To Anshul’s Capital A/c (3,37,500 × 3/5)				2,02,500
	To Parul’s Capital A/c (3,37,500 × 2/5)				1,35,000
	(Being premium for goodwill adjusted in sacrificing ratio)

Working Notes:

Particulars	Year	31^st March 2016	31^st March 2017	31^st March 2020	31^st March 2021
Profits for the year		4,00,000	5,00,000	6,00,000	7,00,000
Less: Overvaluation of Closing Stock		-	-	50,000	-
Add: Overvaluation of Opening Stock		-	-	-	50,000
Less: Annual Charge for Management Cost		1,00,000	1,00,000	1,00,000	1,00,000
Normal Profits		3,00,000	4,00,000	4,50,000	6,50,000

Average Profits = `4,50,000

Goodwill = Average Profits × No. of years of Purchase = ` (4,50,000 ×3) = ` 13,50,000

Page No 5.88:

Question 28:

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings ` 30,000 as capital and ` 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at ` 3,000. New profit-sharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.

Answer:

Journal Entries
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
	A’s Capital A/c	Dr.		1,800
	B’s Capital A/c	Dr.		1,200
	To Goodwill A/c				3,000
	(Goodwill written-off)

	Cash A/c	Dr.		40,000
	To C’s Capital A/c	Dr.			30,000
	To Premium for Goodwill A/c				10,000
	(C brought capital and his share of goodwill in cash)

	Premium for Goodwill	Dr.		10,000
	To A’s Capital A/c				5,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed)

	A	B	C
OLD RATION	3 :	2 :	1
NEW RATIO	5 :	3 :	2

Sacrificing Ratio = Old Ratio − New Ratio

	A’s	=3/5-5/10
		=1/10
	B’s	=2/5-3/10
		=1/10
			X		Y
Sacrificing Ratio =			1/10	:	1/10
=			1	:	1

Distribution of Premium for Goodwill C’s share of Goodwill)

A and B each will get =10,000×1/2=5,000

Goodwill written-off

A’s capital will be debited =3,000×3/5=1,800

B’s capital will be credited =3,000×2/5=1,200

Page No 5.88:

Question 29:

Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at `4,40,000. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was 2 : 2 : 1.
Raja brought `1,00,000 for his capital and necessary cash for his goodwill premium. Goodwill of the firm was valued at `2,50,000.
Record necessary Journal entries in the books of the firm for the above transactions.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
	Anu’s Capital A/c	Dr.		3,30,000
	Bhagwan’s Capital A/c	Dr.		1,10,000
	To Goodwill A/c				4,40,000
	(Old goodwill written off in old ratio)

	Cash A/c	Dr.		1,50,000
	To Raja’s Capital A/c				1,00,000
	To Premium for Goodwill A/c				50,000
	(Capital and goodwill brought in by Raju)

	Premium for Goodwill A/c	Dr.		50,000
	Bhagwan’s Capital A/c 320×2,50,000	Dr.		37,500
	To Anu’s Capital A/c 720×2,50,000				87,500
	(Premium for goodwill adjusted)

Working Notes:

WN1 Calculation of Share in Old Goodwill

Anu's share=4,40,000×3/4=3,30,000

Bhagwan's share=4,40,000×1/4=1,10,000

WN2 Calculation of Raja's Share of Goodwill

Raja's Share of Goodwill=Firm's Goodwill×Raja's Profit Share

=2,50,000×1/5=50,000

WN3 Calculation of Sacrificing Ratio

Sacrificing Ratio=Old Share-New Share

Anu's=3/4-2/5=7/20(sacrifice)

Bhagwan's=1/4-2/5=-3/20(gain)

Page No 5.88:

Question 30:

Ram and Mohan are partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2021, they admit Sohan as a partner for 1/4th share in the profits. Sohan contributed following assets towards his capital and for his share of goodwill:
Stock ` 60,000; Debtors ` 80,000; Land ` 1,00,000, Plant and Machinery ` 40,000.
On the date of admission of Sohan, the goodwill of the firm was valued at ` 6,00,000.
Pass necessary Journal entries in the books of the firm on Sohan's admission.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2021
April 1	Stock A/c	Dr.		60,000
	Debtors A/c	Dr.		80,000
	Land A/c	Dr.		1,00,000
	Plant and Machinery A/c	Dr.		40,000
	To Sohan’s Capital A/c				1,30,000
	To Premium for Goodwill A/c				1,50,000
	(Z brought assets for his share of goodwill and Capital)

April 1	Premium for Goodwill A/c	Dr.		1,50,000
	To Ram’s Capital A/c				90,000
	To Mohan’s Capital A/c				60,000
	(Sohan’s share of Goodwill distributed between Ram and Mohan in sacrificing ratio)