12th | Ts grewal 2021-2022 Question 29 And 30 | Death of a partner

Page No 7.35:


Question 29: Shirish, Harit and Asha were partners in a firm sharing profits in the ratio of 5:4:1. Shirish died on 30th June, 2018. On this date, their Balance Sheet was follows:

Balance sheet of Shirish,  Harish, Asha as at 31st March, 2018

Assets

 

`

Liabilities

`

Capital A/cs:

 

 

Plant and Machinery

5,60,000

Shirish

1,00,000

 

Stock

90,000

Harit

2,00,000

 

Debtors

10,000

Asha

3,00,000

6,00,000

Cash

40,000

Profits for the year 2017-18

 

80,000

 

 

Bills Payable

 

20,000

 

 

 

 

7,00,000

 

7,00,000

 

 

 

 

 

According to the Partnership Deed, in addition to deceased partner’s capital, his executor is entitled to:

(i) Share in profits in the year of death on the basis of average of last two years profit. Profit for the year 2016-17 was 60,000.

(ii) Goodwill of the firm was to be valued at 2 years purchase of average of last two years’ profits.

Prepare Shirish’s Capital Account to be presented to his executor. (CBSE 2019)

 

Answer:


Shirish’s Capital Account

Particulars

Dr. `

Particulars

Cr. `

To Sadhu’s Executors A/c

2,18,750

By Balance b/d

1,00,000

 

 

By P&L Suspense A/c (WN-1)

    8,750

 

 

By Manish’s Capital A/c (WN-2)

56,000

 

 

By Asha’s Capital A/c (WN-2)

14,000

 

 

By P&L Appropriation A/c(WN-3)

40,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,18,750

 

2,18,750

Working notes:

WN-1 Calculation of Sadhu’s share of Profit

Average Profit of last two years= 80,000+60,000/2=70,000

Shirish’s Share of Profit = 70,000×5×3/10×12 = ` 8,750

 

WN-2 Calculation of goodwill

The average profits of the last two years were ` 70,000

Goodwill of the Firm = ` 70,000×2=1,40,000

Share of Shirish is in Goodwill = 1,40,000 × 5/10 = 70,000

Goodwill Share of Shirish is in Goodwill will be compensated by Harish and Asha in 4:1

Harish = 70,000 × 4/5 = 56,000

Asha = 70,000 × 1/5 = 14,000

 

WN-3 Calculation of Sadhu’s share of undistributed Profits for the year 2017-18

Shirish’s Share of Profit = 80,000×5/10 = ` 40,000

 

Page No 7.35:

Question 30:


Virad, Vishad and Roma were partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively. On 31st March, 2013, their Balance Sheet was as under:

 

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

 

 

 

 


 Virad died on 1st October, 2013. It was agreed between his executors and the remaining partners that:
(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.

 

Answer:


Virad’s Capital Account

Dr.

 

Cr.

Particulars

Amount

(`)

Particulars

Amount

(`)

 

 

Balance b/d

3,00,000

Executor’s A/c

5,70,000

Vishad’s Capital A/c

1,12,500

 

 

Roma’s Capital A/c

75,000

 

 

Profit and Loss Suspense A/c

37,500

 

 

Reserve Fund

30,000

 

 

Interest on Capital

15,000

 

5,70,000

 

5,70,000

 

 

 

 

 

Calculation of Gaining Ratio of Vishad and Roma:

 

 

Vishad

Vishad

Roma

 

OLD RATION

5  :

3  :

2

 

NEW RATIO

 

3  :

2

Vishad’s

=3/10-3/10

 

 

=3/10

 

Roma’s

=2/5-2/10

 

 

=2/10

 

Gaining ratio=3:s2

WN1: Calculation of Virad’s Share of Goodwill:

Goodwill= Average profit × no. of purchases years’

Goodwill=  1,50,000×2 1/2 =3,75,000

Virad’s Share of Goodwill = 3,75,000×5/10=1,87,500

Vishal will give=1,87,500×3/5=1,12,500

Roma will give=1,87,500×2/5 =75,000

WN2: Calculation of Profit share of Virad:

Profit for the yeat= 1,50,000

Virad’s Share of profit = 1,50,000×6/12×5/10=37,500

WN3: Calculation of Interest on Virad ‘s Capital:

Virad’s capital=3,00,000

Virad’s Share of profit = 3,00,000×6/12×5/10=15,000

WN4: Virad’s share of Reserve fund:

Virad’s Share of profit = 60,000×5/10=30,000