12th | Ts grewal 2021-2022 Question 26 to 30 | Retirement of a partner

Page No 6.58:

Question 26:

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z retires from the firm on 31st March, 2021. On the date of Z's retirement, the following balances appeared in the books of the firm:
   General Reserve  ` 1,80,000
   Profit and Loss Account (Dr.)  ` 30,000
   Workmen Compensation Reserve  ` 24,000 which was no more required
   Employees' Provident Fund  ` 20,000.
 Pass necessary Journal entries for the adjustment of these items on Z's retirement.

 

Answer:

Journal
Date	Particulars		L.F.	Debit Amount ( `)	Credit Amount ( `)
2021 Mar.31	General Reserve A/c	Dr.		1,80,000
	Workmen Compensation Reserve A/c	Dr.		24,000
	To X’s Capital A/c				1,02,000
	To Y’s Capital A/c				68,000
	To Z’s Capital A/c				34,000
	((Being Accumulated profits distributed among partners in old ratio)
	X’s Capital A/c	Dr.		15,000
	Y’s Capital A/c	Dr.		10,000
	Z’s Capital A/c	Dr.		5,000
	To Profit and Loss A/c				30,000
	((Being Debit balance in Profit and Loss A/c distributed among partners in old ratio)

 

Working Notes:

WN1: Calculation of Share in Credit Balance of Reserves

Total Credit Balance of Reserves

= General Reserve + WCF = 1,80,000 + 24,000 = 2,04,000

X‘s share= 2,04,000××3/6 =1,02,000

Y‘s share= 2,04,000××2/6 =68,000

Z‘s share= 2,04,000××1/6 =34,000                       

 

WN2: Calculation of Share in Debit Balance of Profit and Loss A/c

X‘s share= 30,000××3/6 =15,000

Y‘s share= 30,000××2/6 =10,000

Z‘s share= 30,000××1/6 =5,000         

 

Note: Employees’ Provident Fund will not be distributed as it is a liability and not accumulated profit.

 

Page No 6.59:

Question 27:

Asha, Naveen and Shalini were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a value of  ` 80,000 and General Reserve at  ` 40,000. Naveen decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at  ` 1,20,000. The new profit-sharing ratio decided among Asha and Shalini is 2 : 3.
Record necessary Journal entries on Naveen's retirement.

 

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (`)	Credit Amount (`)
	Asha’s Capital A/c	Dr.		40,000
	Naveen’s Capital A/c	Dr.		24,000
	Shalini’s Capital A/c	Dr.		16,000
	To Goodwill A/c				80,000
	(Being Existing goodwill written off amongst existing partners in old ratio)
	General Reserves A/c	Dr.		40,000
	To Asha’s Capital A/c				20,000
	To Naveen’s Capital A/c				12,000
	To Shalini’s Capital A/c				8,000
	(Being General Reserves distributed  among all partners in old ratio)
	Shalini’s Capital A/c	Dr.		48,000
	To Asha’s Capital A/c				12,000
	To Naveen’s Capital A/c				36,000
	(Being Goodwill adjusted by debiting gaining partner and crediting sacrificing partner and retiring partner)

Calculation of Gaining Ratio:

Gain of a Partner=New Share - Old Shares

Asha's Gain (Sacrifice): 2/5-5/10=4-5/10=(-)1/10

Shalini's Gain (Sacrifice): 3/5-2/10=6-2/10=4/10

Therefore, Both Asha and Naveen would be compensated by Shalini in the ratio of 1:3

Asha's Sacrifice for 1/10th Share=1,20,000×1/10=12,000

Naveen's Sacrifice for 3/10th Share= 1,20,000×3/10=36,000

 

Page No 6.59:

Question 28:

Ram, Laxman and Bharat are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of  ` 1,80,000. Laxman retires and at the time of his retirement, goodwill is valued at  ` 2,52,000. Ram and Bharat decided to share future profits in the ratio of 2 : 1. The Profit for the first year after Laxman's retirement amount to  ` 1,20,000. Give the necessary Journal entries to record goodwill  and to distribute the profit. Show your calculations clearly. 

 

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (`)	Credit Amount (`)
	Ram’s Capital A/c	Dr.		90,000
	Laxman’s Capital A/c	Dr.		60,000
	Bharat’s Capital A/c	Dr.		30,000
	To Goodwill A/c				1,80,000
	((Being Goodwill written off)
		Dr.		42,000
	Ram’s Capital A/c	Dr.		42,000
	Bharat’s Capital A/c				84,000
	To Laxman’s Capital A/c
	((Being Adjustment of Laxman’s share of goodwill)
	Profit & Loss Appropriation A/c	Dr.		1,20,000
	To Ram’s Capital A/c				80,000
	To Bharat’s Capital A/c				40,000
	((Being Profit on revaluation transferred to Partners’ Capital A/c)

 

Working Notes:

WN1:Calculation of Gaining Ratio

Ram :Laxman :Bharat=3:2:1(Old ratio)

Ram :Bharat = 2:1(New ratio)

Gaining Ratio = New Ratio - Old Ratio

Ram's Gain =2/3−3/6=4−3/6=1/6

Bharat's Gain =1/3−1/6=2−1/6=1/6

Ram:Bharat=1:1

WN2: Calculation of Retiring Partner’s Share of Goodwill

Laxman's share of goodwill=2,52,000×2/6=` 84,000

Laxman's share of goodwill will be brought by Ram and Bharat in their gaining ratio1:1

Therefore, Ram's Capital A/c will be debited with 84,000×1/2=` 42,000

And, Bharat's Capital A/c will be debited with 84,000×1/2=` 42,000

Note: The entry for distributing profit as given in the book is wrong. The profit will be distributed between Ram & Bharat and not Ram and Laxman (since Laxman has retired)

 

Page No 6.59:

Question 29:

Partnership Deed of C and D, who are equal partners, has a clause that any partner may retire from the firm on the following terms by giving a six-month notice in writing:
The retiring partner shall be paid−
(a) the amount standing to the credit of his Capital Account and Current Account.
(b) his share of profit to the date of retirement, calculated on the basis of the average profit of the three preceding completed years.
(c) half the amount of the goodwill of the firm calculated at 1^1/2 times the average profit of the three preceding completed years.
C gave a notice on 31st March, 2020 to retire on 30th September, 2020, when the balance of his Capital Account was  ` 6,000 and his Current Account (Dr.)  ` 500. Profits for the three preceding completed years ended 31st March, were: 2018 −  ` 2,800; 2019 −  ` 2,200 and 2020 −  ` 1,600. What amount is due to C as per the partnership agreement? 

 

Answer:

C’s Capital Account
Dr.				Cr.
Particulars		Amount `	Particulars		Amount `
C’s Loan A/c		7,700	Balance b/d		6,000
			C’s Current A/c		1,700
		7,700			7,700

 

C’s Current Account
Dr.					Cr.
Particulars		Amount `	Particulars	Amount `
Balance b/d		500	Profit and Loss Suspense A/c (Share of profit) (WN 1)	550
C’s Capital A/c (balancing figure)		1,700	D’s Current A/c (Share of goodwill) (WN 2)	1,650
		2,200		2,200

Working Notes:

WN 1 Calculation of Profit (from April 01, 2020 to Sept. 30, 2020)

Average profit = total profit of past given years/number of years

Average profit =2,800+2,200+1,600/3=2,200

C’s  share of profit (for last 6 month)=Average profit×C’s share×6/12

=2,200×1/2×6/12=550

 

WN 2 Calculation of Goodwill 

Goodwill = Average Profit × 1.5
= 2,200 × 1.5 = ` 3,300
C’s Share of Goodwill =3,300×1/2=1650

 

Page No 6.59:

Question 30:

X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. Their Balance Sheet as at 31st March, 2021 was:

Liabilities			Amount ( `)	Assets	Amount  ( `)
Creditors			49,000	Cash	8,000
Reserve			18,500	Debtors	19,000
Capital A/cs:   X		82,000		Stock	42,000
Y		60,000		Building	2,07,000
Z		75,500	2,17,500	Patents	9,000
			2,85,000		2,85,000

    
Y retired on 1st April, 2021 on the following terms:
(a) Goodwill of the firm was valued at  ` 70,000 and was not to appear in the books.
(b) Bad Debts amounted to  ` 2,000 were to be written off.
(c) Patents were considered as valueless.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of X and Z after Y's retirement.

 

Answer:

Revaluation Account
Dr.						Cr.
Particulars		Amount ( `)	Particulars		Amount ( `)
Bad Debts		2,000	Loss transferred to:
Patents		9,000	X’s Capital A/c	4,400
			Y’s Capital A/c	4,400
			Z’s Capital A/c	2,200	11,000
		11,000			11,000

 

Partners’ Capital Accounts
Dr.								Cr.
Particulars		X	Y	Z	Particulars	X	Y	Z
Revaluation A/c (Loss)		4,400	4,400	2,200	Balance b/d	82,000	60,000	75,500
Y’s Capital A/c (Goodwill)		18,667	–	9,333	Reserve (Old Ratio)	7,400	7,400	3,700
Y’s Loan A/c		–	91,000	–	X’s Capital A/c  (Goodwill)	–	18,667	–
Balance c/d		66,333	–	67,667	Z’s Capital A/c (Goodwill)	–	9,333	–
		89,400	95,400	79,200		89,400	95,400	79,200

 

Balance Sheet as on March 31, 2021 (after Y’s Retirement)
Liabilities		Amount ( `)	Assets	Amount ( `)
Creditors		49,000	Cash	8,000
Y’s Loan		91,000	Debtors (19000-2000)	17,000
Capital A/cs:			Stock	42,000
X	66,333		Building	2,07,000
Z	67,667	1,34,000
		2,74,000		2,74,000

 

Working Notes:

 

WN 1 Calculation of Gaining Ratio

Old Ratio (X, Y and Z) = 2 : 2 : 1

Y retires from the firm.

∴Gaining Ratio = 2 : 1

 

WN 2 Adjustment of Goodwill

Goodwill of the firm = ` 70,000

Y’s Share of Goodwill = 70,000×2/5=28,000

This share of goodwill is to be distributed between X and Z in their gaining ratio (i.e. 2 : 1).

X‘s share= 28,000×2/3=18,667

Z‘s share= 28,000×1/3=9,333

	Journal
Date	Particulars		L.F.	Debit Amount ( `)	Credit Amount ( `)
2021 April 1	X’s Capital A/c	Dr.		18,667
	Z’s Capital A/c	Dr.		9,333
	To Y’s Capital A/c				28,000
	(Adjustment of goodwill made on Y’s retirement)

 

Click on Below link for more questions Of Volume-1 of 12th

Chapter-6: Retirement of a partner | 2021-2022

From Question 1 to 5
From Question 6 to 10
From Question 11 to 15
From Question 16 to 20
From Question 21 to 25
From Question 26 to 30
From Question 31 to 35
From Question 36 to 40
From Question 41 to 45
From Question 46 to 50
From Question 51 to 53
From Question 54 to 56

Jump to chapter list of solution-2021-22

Jump to chapter list of solution-2020-21
Jump to chapter list of solution-2019-20