12th | Ts grewal 2021-2022 Question 31 to 35 | Retirement of a partner

Page No 6.60:

Question 31:

Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st March, 2016, their Balance Sheet was as under:

 

 

 

Liabilities

Amount
(
`)

Assets

Amount
(
`)

Trade creditors

53,000

Bank

60,000

Employees' Provident Fund

47,000

Debtors

60,000

Kanika's Capital

2,00,000

Stock

1,00,000

Disha's Capital

1,00,000

Fixed assets

2,40,000

Kabir's Capital

80,000

Profit and Loss A/c

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

4,80,000

 

4,80,000

 

 

 

 

 

 

 

 

 

 

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of three completed years preceding the date of retirement. The profits for the year:
      2013-14 were 
` 1,00,000 and for 2014-15 were  ` 1,30,000.
(b) Fixed Assets were to be increased to 
` 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
 Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.  

(AI 2017 C)

 

Answer:

Revaluation Account

Dr.

Cr.

Particulars

Amount

`

Particulars

Amount

`

Revaluation Profit

 

Fixed Assets

60,000

  Kanika’s Capital

40,000

 

Stock

20,000

  Disha’s Capital

20,000

 

 

 

  Kabir’s Capital

20,000

80,000

 

 

 

80,000

 

80,000

 

 

 

 

 

Partners’ Capital Account 

Dr.

Cr.

Particulars

Kanika

Disha

Kabir

Particulars

Kanika

Disha

Kabir

Profit & Loss A/c

10,000

5,000

5,000

Balance b/d

2,00,000

1,00,000

80,000

Kanika’s Capital A/c

 

35,000

35,000

Disha’s Capital A/c

35,000

 

 

Kanika’s Loan A/c

3,00,000

 

 

Kabir’s Capital A/c

35,000

 

 

Balance c/d

 

80,000

60,000

Revaluation

40,000

20,000

20,000

 

 

 

 

 

 

 

 

 

3,10,000

1,20,000

1,00,000

 

3,10,000

1,20,000

1,00,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2016

Liabilities

Amount

( `)

Assets

Amount

( `)

Employees’ Provident Fund

47,000

Bank

60,000

Trade Creditors

53,000

Sundry Debtors

60,000

Kanika’s Loan A/c

3,00,000

Stock

1,20,000

Capitals

 

Fixed Assets

3,00,000

   Disha

80,000

 

 

 

   Kabir

60,000

1,40,000

 

 

 

5,40,000

 

5,40,000

 

 

 

 


Working Notes:
WN1: Calculation of Goodwill

Goodwill=Average Profits×Number of Years' Purchase

Average Profits=Total ProfitsNumber of Years=1,00,000+1,30,000−20,000/3=2,10,000/3=` 70,000

Goodwill=70,000×2=` 1,40,000

Kanika's share=1,40,000×2/4=70,000 (to be borne by gaining partners in gaining ratio)

Note: Since no information is given about the share of gain, it is assumed that the old partners are gaining in their old profit sharing ratio.

 



Page No 6.60:

Question 32:

N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2016 their Balance Sheet was as under:

Liabilities

Amount

( `)

Assets

Amount

( `)

Creditors

1,65,000

Cash

1,20,000

General Reserve

90,000

 Debtors

1,35,000

 

Capitals:

 

 Less: Provision

15,000

1,20,000

 N

2,25,000

 

Stock

1,50,000

 S

3,75,000

 

Machinery

4,50,000

 G

4,50,000

10,50,000

Patents

90,000

 

 

 

Building

3,00,000

 

 

 

Profit and Loss Account

75,000

 

13,05,000

 

13,05,000

 

 

 

 


G retired on the above date and it was agreed that:
(a) Debtors of 
` 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building will be depreciated by 5%. 
(c) An unrecorded creditor of 
` 30,000 will be taken into account. 
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G's retirement was valued at 
` 90,000.
Pass necessary Journal entries for the above transactions in the books of the firm on G's retirement.

(Foreign 2017)

 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

 

General Reserve A/c

Dr.

 

90,000

 

 

    To N’s Capital A/c

 

 

 

18,000

 

    To S’s Capital A/c

 

 

 

27,000

 

    To G’s Capital A/c

 

 

 

45,000

 

(Balance in reserve distributed among all partners in old ratio)

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

15,000

 

 

 S’s Capital A/c

Dr.

 

22,500

 

 

 G’s Capital A/c

Dr.

 

37,500

 

 

     To Profit & Loss A/c

 

 

 

75,000

 

(Debit balance P&L A/c written off among all partners in old ratio)

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

18,000

 

 

 S’s Capital A/c

Dr.

 

27,000

 

 

     To G’s Capital A/c

 

 

 

45,000

 

(Goodwill adjusted in gaining ratio)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

1,65,000

 

 

   To Patent A/c

 

 

 

90,000

 

   To Stock A/c

 

 

 

7,500

 

   To Machinery  A/c 

 

 

 

22,500

 

   To Building A/c

 

 

 

15,000

 

   To Creditors A/c

 

 

 

30,000

 

(Decrease in assets and increase in liabilities debited to Revaluation A/c)

 

 

 

 

 

 

 

 

 

 

 

Provision for Doubtful Debts A/c

Dr.

 

2,550

 

 

    To Revaluation A/c

 

 

 

2,550

 

(Excess provision written back)

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

32,490

 

 

 S’s Capital A/c

Dr.

 

48,735

 

 

 G’s Capital A/c

Dr.

 

81,225

 

 

     To Revaluation A/c

 

 

 

1,62,450

 

(Loss on revaluation debited to partners’ capital accounts in old ratio)

 

 

 

 

 

 

 

 

 

 

 

G’s Capital A/c

Dr.

 

4,21,275

 

 

   To G’s Loan A/c

 

 

 

4,21,275

 

(Amount due to G transferred to his loan A/c)

 

 

 

 


Working Notes:

WN1: Calculation of G’s Share of Goodwill

G's share=Firm's Goodwill×G's Profit Share

G's share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)

WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
N's gain=2/5−2/10=2/10

S's gain=3/5−3/10=3/10Gaining Ratio=2:3

N's share=45,000×2/5=18,000

S's share=45,000×3/5=27,000

WN2: Calculation of Excess/Deficit Provision for Doubtful Debts

Required Provision @5%=1,35,000−6,000×5100=6,450

Existing Provision after writing bad-debts= 9,000

Excess Provision to be written back=2,550 9,000−6,450

WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits

= 4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
=
` 4,21,275

 



Page No 6.61:

Question 33: Ashok, Bhaskar and Chaman are partners in a firm, sharing profits and losses as Ashok 1/3, Bhaskar 1/2, and Chaman 1/6 respectively. The Balance Sheet of the firm as at 31st March, 2021 was

Liabilities

`

Assets

`

Capital A/cs:

 

 

Building

 

5,00,000

Ashok

3,00,000

 

Plant and Machinery

 

4,00,000

Bhaskar

4,00,000

 

Furniture

 

1,00,000

Chaman

2,50,000

9,50,000

Stock

 

2,50,000

General Reserve

 

2,20,000

Debtors

1,80,000

 

Sundry Creditors

 

2,50,000

Less: Provision for Doubtful Debts

5,000

1,75,000

Loan Payable

 

1,50,000

Cash in Hand

 

85,000

 

 

 

Advertisement Suspense Account

 

60,000

 

 

15,70,000

 

 

15,70,000

Chaman retired on 1st April, 2021 subject to the following adjustments:

(a) Goodwill of the firm be valued at `2,40,000. Chaman's share of goodwill be adjusted into the Capital Accounts of Ashok and Bhaskar who will share future profits in the ratio of 3:2.

(6) Plant and Machinery to be reduced by 10% and Furniture by 5%.

(c) Stock to be increased by 15% and Building by 10%.

(d) Provision for Doubtful Debts to be raised to `20,000.

Prepare Revaluation Account, Capital Account of Chaman and the Balance Sheet of the firm after Chaman's retirement.

 

Answer:

Profit and loss adjustment a/c

Dr.

 

 

Cr.

Particulars

`

Particulars

`

To  Plan and machinery

To Furniture

To Prov. for doubtful debts

To capital a/c

(profit transferred to)

Ashok =27,500×2/6= 9,167

Bhaskar=27,500×3/6=13,750

Chaman =27,500×1/6=4,583

40,000

5,000

15,000

 

 

 

 

27,500

By stock

By factory building

37,500

50,000

 

87,500

 

87,500

1

Partners’ Capital Account 

Dr.

Cr.

Particulars

Ashok

Bhaskar

Chaman

Particulars

Ashok

Bhaskar

Chaman

B’s Capital A/c

24,000

Balance b/d

3,00,000

4,00,000

2,50,000

C’s Capital A/c

40,000

A’s Capital A/c

24,000

40,000

Advertisement sus. a/c

C’s loan a/c

20,000

 

30,000

10,000

 

3,21,250

Profit and loss adjustment a/c

General reserve a/c

9,167

 

73,333

13,750

 

1,10,000

4,583

 

36,667

Balance c/d

2,98,500

5,17,750

 

 

3,82,500

5,47,750

3,31,250

 

3,82,500

5,47,750

3,31,250

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

as on April 01, 2021 (after C’s Retirement)

 

Liabilities

Amount

( `)

Assets

Amount

( `)

 

Sundry Creditors

2,50,000

Factory building

5,50,000

 

Loan Payable

1,50,000

Plant and machinery

3,60,000

 

C’s Loan

3,21,250

Furniture

95,000

 

Stock

2,87,500

 

Capital A/c

 

Debtors     1,80,000

 

Ashok

2,98,500

 

Less;

prov.           20,000

 

1,60,000

 

Bhaskar

5,17,750

3,54,000

Cash     

85,000

 

 

15,37,500

 

15,37,500

 

 

 

 

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

 

 

Ashok’s Capital A/c

Dr.

 

64,000

 

 

 

    To Bhaskar’s Capital A/c

 

 

 

24,000

 

 

    To Chaman’s Capital A/c

 

 

 

40,000

 

 

(Being goodwill adjusted for compensating bhaskar, Chaman)

 

 

 

 

 

 

 

 

 

 

 

 Profit and loss adjustment a/c

Dr.

 

60,000

 

 

 

   To Plant and machinery A/c

 

40,000 

 

 

   To  Furniture A/c

 

 5,000

 

 

   To Prov. for doubtful debts  A/c 

 

 

15,000

 

 

(Decrease in assets and increase in liabilities debited to Revaluation A/c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

18,000

 

 

 

 S’s Capital A/c

Dr.

 

27,000

 

 

 

     To G’s Capital A/c

 

 

 

45,000

 

 

(Goodwill adjusted in gaining ratio)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock A/c

Dr.

 

37,500

 

 

Factory building  A/c

Dr.

 

50,000

 

 

To P&L adjustment  A/c

 

87,500

 

 

(Decrease in assets debited to Revaluation A/c)

 

 

 

 

 

 

 

 

 

Working notes;

Old ratio of Ashok : Bhaskar : chaman=1/3:1/2:1/6

=1/3×2/2:1/2×3/3=1/6

=2/6:3/6:1/6

=2:3:1

New ratio of Ashok and Bhaskar= 3:2

Gaining ratio= New ratio – old ratio

Ashok = 3/5-2/6=18-10/30=8/30

Bhaskar= 2/5-3/6=12-15/30= -3/30

Goodwill of firm= 2,40,000

Bhaskar will get =2,40,000×3/30=24,000

Chaman’s share of goodwill = 2,40,000×1/6=40,000

Ashok will give Bhaskar and  chaman 24,000, 40,000 respectively.

 



Page No 6.62:

Question 34: Chintan, Ayush and Sudha were partners in a firm sharing profits and losses in the ratio of 5: 3:2. On 31st March, 2019, their Balance Sheet was as follows:

BALANCE SHEET OF CHINTAN, AYUSH AND SUDHA as at 31st March, 2019

Liabilities

`

Assets

`

Capitals:

 

Plant and Machinery

 

90,000

Chintan

90,000

 

Furniture

 

60,000

Ayush

60,000

 

Stock

 

30,000

Sudha

40,000

1,90,000

Debtors

60,000

 

Provident Fund

 

30,000

Less: Provision for Doubtful Debts

5,000

55,000

General Reserve

 

20,000

Cash at Bank

 

15,000

Creditors

 

10,000

 

 

 

 

 

2,50,000

 

 

2,50,000

Chintan retired on the above date and it was agreed that:

(a) Debtors of `5,000 were to be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts was to be created.

(b) Goodwill of the firm on Chintan's retirement was valued at `1,00,000 and Chintan's share of the same will be adjusted by debiting the Capital Accounts of Ayush and Sudha.

(c) Stock was revalued at `36,000.

(d) Furniture was undervalued by `9,000.

(e) Liability for Workmen's Compensation of `2,000 was to be created.

(f) Chintan was to be paid `20,000 by cheque and the balance was to be transferred to his loan account.

Pass the necessary Journal entries in the books of the firm on Chintan's retirement.

(CBSE 2020)

Answer:

Date

Particulars

L.F.

Dr. (`)

Cr. (`)

 

Stock A/c

Furniture A/c

Provision A/c

  To Revolution  A/c

(Being Decrease in the Value of Liabilities and increase in the value of Assets)

Dr.

Dr.

Dr.

 

6,000

9,000

2,250

 

 

 

17,250

 

Revaluation A/c

  To Bad debts A/c

  To Liabilities for Worker compensation A/c

(Being Decrease in the Value of Assets and increase in the value of Liabilities)

Dr.

 

7,000

 

5,000

2,000

 

Revaluation A/c

  To Chintan’s Capital A/c

  To Ayush’s Capital A/c

  To Sudha’s Capital A/c

(being gain of revaluation Account transferred to Capital accounts)

Dr.

 

10,250

 

5,125

3,075

2,050

 

General Reserve A/c

  To Chintan’s Capital A/c

  To Ayush’s Capital A/c

  To Sudha’s Capital A/c

(being gain of General Reserves transferred to Capital accounts)

Dr.

 

20,000

 

10,000

6,000

4,000

 

Ayush’s Capital A/c

Sudha’s Capital A/c

  To Chintan’s Capital A/c

(Being Retiring Partner compensated)

Dr.

Dr.

 

30,000

20,000

 

 

50,000

 

Chintan’s Capital A/c

  To Bank A/c

(Being Chintan was paid `20,000 through cheque)

Dr.

 

20,000

 

20,000

 

Chintan’s Capital A/c

  To  Chintan’s  Loan A/c

(Being balance of Capital transferred to His loan Account)

Dr.

 

1,35,125

 

1,35,125

 



Page No 6.62:

Question 35:

Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2021, Naresh retired on that date, Balance Sheet of the firm was as follows:
 

Liabilities

Amount

( `)

Assets

Amount

( `)

General Reserve

12,000

Bank

7,600

Sundry Creditors

15,000

Debtors

6,000

 

Bills Payable

12,000

Less: Provision for Doubtful Debts

400

5,600

Outstanding Salary

2,200

Stock

 

9,000

Provision for Legal Damages

6,000

Furniture

 

41,000

Capital A/cs:

 

Premises

 

80,000

Pankaj

46,000

 

 

 

Naresh

30,000

 

 

 

Saurabh

20,000

96,000

 

 

 

 

 

 

 

 

1,43,200

 

1,43,200

 

 

 

 

 
Additional Information:
(a) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for 
` 1,200 and furniture to be brought up to  ` 45,000. 
(b) Goodwill of the firm be valued at 
` 42,000.
(c) 
` 26,000 from Naresh's Capital Account be transferred to his Loan Account and balance be paid through bank: if required, necessary loan may be obtained from bank.
(d) New profit-sharing ratio of Pankaj and Saurabh is decided to be 5 : 1.
Give the necessary Ledger Accounts and Balance Sheet of the firm after Naresh's retirement.

 

Answer:

Revaluation Account

Dr.

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Stock

900

Premises

16,000

Provision for Legal Damages

1,200

Provision for Doubtful Debts

100

Revaluation Profit

 

Furniture

4,000

Pankaj’s Capital A/c

9,000

 

 

 

Naresh’s Capital A/c

6,000

 

 

 

Saurabh’s Capital A/c

3,000

18,000

 

 

 

20,100

 

20,100

 

 

 

 

 

Partners’ Capital Accounts

Dr.

Cr.

Particulars

Pankaj

Naresh

Saurabh

Particulars

Pankaj

Naresh

Saurabh

Naresh’s Capital A/c

14,000

 

 

Balance b/d

46,000

30,000

20,000

Naresh’s Loan A/c

 

26,000

 

General Reserve

6,000

4,000

2,000

Bank

 

28,000

 

Revaluation (Profit)

9,000

6,000

3,000

Balance c/d

47,000

 

25,000

Pankaj’s Capital A/c

 

14,000

 

 

61,000

54,000

25,000

 

61,000

54,000

25,000

 

 

 

 

 

 

 

 

 

Bank Account

  Dr.

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Balance b/d

7,600

Naresh’s Capital A/c

28,000

Bank Loan (Balancing Figure)

20,400

 

 

 

28,000

 

28,000

 

 

 

 

 

Balance Sheet

as on March 31, 2021

Liabilities

Amount

( `)

Assets

Amount

( `)

Sundry Creditors

15,000

Debtors

6,000

 

Bills Payable

12,000

 Less: Provision for Doubtful Debts

300

5,700

Bank Loan

20,400

Stock

8,100

Outstanding Salaries

2,200

Furniture

45,000

Provision for Legal Damages

7,200

Premises

96,000

Naresh’s Loan

26,000

 

 

Capitals:

 

 

 

Pankaj

47,000

 

 

 

Saurabh

25,000

72,000

 

 

 

1,54,800

 

1,54,800