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 |
General Reserve A/c |
|
|
|
|
|
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 |
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 11/2 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 |
|
|
|
|
|
|
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
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