Page No 7.35:
Question
31: The Balance Sheet of A, B and C who were
sharing profits in the ratio of 3:3 :4 as at 31st
March, 2019 was as follows:
BALANCE SHEET OF A, B AND C as at 31th March, 2019
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Assets
|
|
`
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Liabilities
|
`
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General Reserve
|
|
40,000
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Cash
|
4,000
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Bills Payable
|
|
15,000
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Stock
|
43,000
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Loan from Bank
|
|
30,000
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Investment
|
70,000
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Capital A/cs:
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Land and Buildings
|
1,58,000
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A
|
60,000
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B
|
90,000
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C
|
40,000
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1,90,000
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2,75,000
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2,75,000
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A died on 1st October, 2019. The
partnership deed provided for the following on the death of a partner:
(a) Goodwill of the firm be valued at two
years’ purchase of average profits for the last three years.
(b) The profit for the year ending 31st
March, 2019 was ` 50,000.
(c) Interest on capital was to be provided
@ 6% p.a.
(d) The average profits of the last three
years were ` 35,000.
Prepare A’s Capital Account to be rendered
to his executors. (CBSE 2020 C)
Answer:
A’s Capital Account
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Particulars
|
Dr. `
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Particulars
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Cr. `
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To Sadhu’s Executors A/c
|
1,02,300
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By Balance b/d
|
60,000
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By General Reserve A/c (WN-1)
|
12,000
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By B’s Capital A/c (WN-2)
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9,000
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By C’s Capital A/c (WN-2)
|
12,000
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By Interest on Capital
A/c (WN-3)
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1,800
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1,02,300
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1,02,300
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Working
notes:
WN-1
A’s share of General Reserve
A’s
Share of Profit = 40,000×3/10 = `
12,000
WN-2
Calculation of goodwill
The average profits of the last three years
were ` 35,000
Goodwill of the Firm = ` 35,000×2=70,000
Share of A is in Goodwill = 70,000 × 3/10
= 21,000
Goodwill Share of A is in Goodwill will be
compensated by B and C in 3:4
A = 21,000 × 3/7 = 9,000
B = 21,000 × 4/7 = 12,000
WN-3
Calculation of Interest on Capital
A’s Interest on Capital till the date of
death = 60,000×6×6/100×12=1,800
Page No 7.36:
Question 32:
R, S and T were partners sharing profits and losses
in the ratio of 5 : 3 : 2 respectively. On 31st March,
2018, their Balance Sheet stood as:
Liabilities |
` |
Assets |
` |
|
Sundry Creditors |
40,000 |
Goodwill |
25,000 |
|
Bills Payable |
15,000 |
Leasehold |
1,00,000 |
|
Workmen Compensation
Reserve |
30,000 |
Patents |
30,000 |
|
Capital A/cs: |
|
Machinery |
1,50,000 |
|
R |
1,50,000 |
|
Stock |
50,000 |
S |
1,25,000 |
|
Debtors |
40,000 |
T |
75,000 |
3,50,000 |
Cash
at Bank |
40,000 |
|
4,35,000 |
|
4,35,000 |
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T died on 1st August, 2018. It was agreed that:
(a) Goodwill be valued at 212 years' purchase of average of last 4
years' profits which were:
2014-15: `
65,000; 2015-16: ` 60,000;
2016-17: ` 80,000 and 2017-18:
`
75,000.
(b) Machinery be valued at ` 1,40,000; Patents be valued at ` 40,000; Leasehold be valued at
`
1,25,000 on 1st August, 2018.
(c) For the purpose of calculating T's share in the profits of 2018-19, the
profits in 2018-19 should be taken to have accrued on the same scale as in 2017-18.
(d) A sum of ` 21,000 to be paid
immediately to the Executors of T and the balance to be paid in four
equal half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T's
Executors' Account.
Answer:
Journal |
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Particulars |
L.F. |
Debit ` |
Credit ` |
|
Revaluation
A/c |
Dr. |
|
10,000 |
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To
Machinery A/c |
|
|
10,000 |
|
(Decrease
in value of Machinery transferred to Revaluation Account) |
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Patents
A/c |
Dr. |
|
10,000 |
|
Leasehold
A/c |
Dr. |
|
25,000 |
|
To
Revaluation A/c |
|
|
35,000 |
|
(Increase
in value Patents and Leasehold transferred to Revaluation Account) |
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Revaluation
A/c |
Dr. |
|
25,000 |
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To
R’s Capital A/c |
|
|
12,500 |
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To
S’s Capital A/c |
|
|
7,500 |
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To
T’s Capital A/c |
|
|
5,000 |
|
(Revaluation
profit distributed among partners in their old ratio) |
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R’
Capital A/c |
Dr. |
|
12,500 |
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S’s
Capital A/c |
Dr. |
|
7,500 |
|
T’s
Capital A/c |
Dr. |
|
5,000 |
|
To
Goodwill A/c |
|
|
25,000 |
|
(Goodwill
written off among partners in their old ratio) |
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R’s
Capital A/c |
Dr. |
|
21,875 |
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S’s
Capital A/c |
Dr. |
|
13,125 |
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To
T’s Capital A/c |
|
|
35,000 |
|
(T’s
share of goodwill adjusted) |
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|
Profit
and Loss Suspense A/c |
Dr. |
|
5,000 |
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To T’s Capital A/c |
|
|
5,000 |
|
(T’s
share of profit transferred to his capital account) |
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|
|
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|
Workmen’s
Compensation Reserve A/c |
Dr. |
|
30,000 |
|
To
R’s Capital A/c |
|
|
15,000 |
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To
S’s Capital A/c |
|
|
9,000 |
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To
T’s Capital A/c |
|
|
6,000 |
|
(Workmen’s
Compensation Reserve distributed among partners in their old ratio ) |
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T’s
Capital A/c |
Dr. |
|
1,21,000 |
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To
T’s Executors A/c |
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|
1,21,000 |
|
(Amount
due to T after all adjustments transferred to his Executor’s Account) |
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T’s
Executor’s A/c |
Dr. |
|
21,000 |
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To
Bank A/c |
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|
21,000 |
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(Amount
paid to T’s Executor) |
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T’s Executor’s
Account |
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Dr. |
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Cr. |
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Date |
Particulars |
Amount ` |
Date |
Particulars |
Amount ` |
2018 |
|
|
2018 |
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|
Aug.
01 |
Cash
A/c |
21,000 |
Aug. 01 |
T’s
Capital A/c |
1,21,000 |
2019 |
|
|
2019 |
|
|
Jan.
31 |
Cash
A/c (25,000 + 5,000) |
30,000 |
Jan. 31 |
Interest
(1,00,000 ×10% for 6 months) |
5,000 |
Mar.
31 |
Balance
c/d |
76,250 |
Mar. 31 |
Interest
(75,000 ×10% for 2 months) |
1,250 |
|
|
1,27,250 |
|
|
1,27,250 |
2019 |
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|
2019 |
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|
Aug.
01 |
Cash
A/c (25,000 + 1,250 + 2,500) |
28,750 |
Apr. 01 |
Balance
b/d |
76,250 |
2020 |
|
|
Aug. 01 |
Interest
(75,000 × 10% for 4 months) |
2,500 |
Jan. 31 |
Cash
A/c (25,000 + 2,500) |
27,500 |
2020 |
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|
Mar.
31 |
Balance
c/d |
25,417 |
Jan. 31 |
Interest
(50,000 × 10% for 6 months) |
2,500 |
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|
Mar. 31 |
Interest
(25,000 × 10% for 2 months) |
417 |
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|
81,667 |
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|
81,667 |
2020 |
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|
2020 |
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|
Aug.
01 |
Cash
A/c (25,000 + 417 + 833) |
26,250 |
Apr. 01 |
Balance
b/d |
25,417 |
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|
Aug. 01 |
Interest
(25,000 × 10% for 4 months) |
833 |
|
|
26,250 |
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|
26,250 |
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Working Notes:
WN 1 Calculation of Goodwill
Goodwill = Average Profit × Number of Year’s Purchase
Average profit = total profit
of past given years/number of years
Average profit =65,000+60,000+80,000+75,000/4=2,80,000/4=70,000
∴ Goodwill =
Average Profit × Number of Years’ Purchase
= 70,000 × 2.5 = ` 1,75,000
WN 2 Adjustment of Goodwill
Old Ratio (R, S and T) = 5 : 3 : 2
T died.
∴ New Ratio (R and
S) = 5 : 3 and
Gaining Ratio = 5 : 3
T’s Share in Goodwill = 1,75,000×2/10=35,000
This share of goodwill is to be distributed between R and S in their gaining
ratio (i.e. 5 : 3).
R’s Share of Goodwill =35,000×5/8=21875
S’s Share of
Goodwill =35,000×3/8=13,125
WN 3 Calculation of T’s Share of Profit
Profit for 2017-18 = ` 75,000
T's Share of Profit for 2017-18 =75,000×2/10×4/12=`5,000
WN 4
Revaluation
Account |
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Dr. |
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Cr. |
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Particulars |
Amount ` |
Particulars |
Amount ` |
|
Machinery |
10,000 |
Patents |
10,000 |
|
Profit
transferred to: |
|
Leasehold |
25,000 |
|
R’s
Capital A/c |
12,500 |
|
|
|
S’s
Capital A/c |
7,500 |
|
|
|
T’s
Capital A/c |
5,000 |
25,000 |
|
|
|
35,000 |
|
35,000 |
|
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|
WN 5
T’s Capital
Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount ` |
Particulars |
Amount ` |
Goodwill |
5,000 |
Balance
b/d |
75,000 |
T’s
Executor’s A/c |
1,21,000 |
Workmen’s
Compensation Reserve |
6,000 |
|
|
Profit
and Loss Suspense A/c |
5,000 |
|
|
R’s
Capital A/c |
21,875 |
|
|
S’s
Capital A/c |
13,125 |
|
|
Revaluation
A/c (Profit) |
5,000 |
|
1,26,000 |
|
1,26,000 |
|
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Click on Below link for more questions Of Volume-1 of 12th
Chapter-6: Retirement of a partner | 2021-2022
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