# 12th | Ts grewal 2021-2022 Question 33 And 34 | Death of a partner

#### Page No 7.36:

Question 33: Aman, Naman and Raman were partners in a firm sharing profits and losses in the ratio of 2:2:1. On 31st March, 2021, their Balance Sheet was as follows:

#### 29,50,000

Naman died on 30th June, 2021. According to the Partnership Deed, his legal heirs were entitled to:

(a) Balance in his Capital Account.

(b) His share of goodwill will be calculated on the basis of thrice the average of the past 4 years’ profits.

(c) His share in profits up to the date of death on the basis of average profits of the last two years.

(d) Interest on capital @ 12% p.a. up to the date of his death.

The firm’s profits for the last four years ended 31st March, were:

2018: ` 2,40,000; 2019: ` 4,00,000; 2020: ` 5,20,000 and 2021: ` 4,40,000.

Naman’s Executor was paid the sum due immediately. Prepare Naman’s Capital Accounts to be presented to his legal heirs.

#### 13,49,000

Working notes:

WN-1 Naman’s share of Workers’ Compensation Reserve

Naman’s Share of Profit = 50,000×2/5 = ` 20,000

WN-2 Naman’s share of General Reserve

Naman’s Share of Profit = 2,00,000×2/5 = ` 80,000

WN-3 Naman’s share of Profit till the date of death

Average Profit =5,20,000+4,40,000/2=4,80,000

Naman’s Share of Profit = 4,80,000×2×3/5×12 = ` 48,000

WN-4 Calculation of Interest on Capital

Naman’s Interest on Capital till the date of death = 7,00,000×12×3/100×12=21,000

WN-5 Calculation of goodwill

The average profits = 2,40,000+4,00,000+5,20,000 +4,40,000/4=4,00,000

Goodwill of the Firm = ` 4,00,000×3=12,00,000

Share of Naman is in Goodwill = 12,00,000 × 2/5 = 4,80,000

Goodwill Share of Naman is in Goodwill will be compensated by Aman and Raman in 2:1

Aman = 4,80,000 × 2/3 = 3,20,000

Raman = 4,80,000 × 1/3 = ,160,000

Naman’s Share of Profit = 50,000×2/5 = ` 20,000

#### Question 34:

The Balance Sheet of X, Y and Z as at 31st March, 2020 was:

 Liabilities Amount ( `) Assets Amount ( `) Bills Payable 2,000 Cash at Bank 5,800 Employees' Provident Fund 5,000 Bills Receivable 800 Workmen Compensation Reserve 6,000 Stock 9,000 General Reserve 6,000 Sundry Debtors 16,000 Loans 7,100 Furniture 2,000 Capital A/cs: Plant and Machinery 6,500 X 22,750 Building 30,000 Y 15,250 Advertising Suspense 6,000 Z 12,000 50,000 76,100 76,100

The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2020. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 2020:
` 24,000; 2019:  ` 16,000; 2018:  ` 20,000 and 2017:  ` 10,000 and 2016:  ` 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock  ` 10,000; Debtors
` 15,000; Furniture  ` 1,500; Plant and Machinery  ` 5,000; Building  ` 35,000. A Bill Receivable for  ` 600 was found worthless.
(d) A Sum of
` 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.

 Journal Particulars L.F. Debit Amount ` Credit Amount ` Workmen’s Compensation Reserve Dr. 6,000 To X’s Capital A/c 3,000 To Y’s Capital A/c 2,000 To Z’s Capital A/c 1,000 (Workmen’s Compesation Reserve distributed among partners in their old ratio) General Reserve A/c Dr. 6,000 To X’s Capital A/c 3,000 To Y’s Capital A/c 2,000 To Z’s Capital A/c 1,000 (General Reserve distributed among partners in their old ratio) X’s Capital A/c Dr. 3,000 Y’s Capital A/c Dr. 2,000 Z’s Capital A/c Dr. 1,000 To Advertisement Suspense A/c 6,000 (Advertisement suspense written off among partners in their old ratio) X’s Capital A/c Dr. 4,500 Y’s Capital A/c Dr. 3,000 To Z’s Capital A/c 7,500 (Z’s share of goodwill adjusted) Revaluation A/c Dr. 3,600 To Sundry debtors A/c Dr. 1,000 To Furniture A/c 500 To Plant and Machinery A/c 1,500 To Bills Receivable A/c 600 (Decrease in value of Assets transferred to Revaluation Account) Stock A/c Dr. 1,000 Building A/c Dr. 5,000 To Revaluation A/c 6,000 (Increase in value of Assets transferred to Revaluation Account) Revaluation A/c Dr. 2,400 To X’ Capital A/c 1,200 To Y’s Capital A/c 800 To Z’s Capital A/c 400 (Revaluation profit distributed among partners in their old ratio) Profit and Loss Suspense A/c Dr. 1,333 To Z’s Capital A/c 1,333 (Z’s share of profit transferred his capital account) Z’s Capital A/c Dr. 22,233 To Z’s Executor’s A/c 22,233 (Amount due to Z transferred to his Executor’s Account) Z’s Executor’s A/c Dr. 12,333 To Bank A/c 12,333 (Amount paid to Z’s Executor)

 Z’s Executor’s Account Dr. Cr. Date Particulars Amount ` Date Particulars Amount ` 2020 2020 July 31 Bank A/c 12,233 July 31 Z’s Capital A/c 22,233 2021 2021 Mar. 31 Balance c/d 10,667 Mar. 31 Interest (10,000 × 10% for 8 months) 667 22,900 22,900 2021 2021 July 31 Bank A/c (5,000 + 667 + 333) 6,000 Apr. 01 Balance b/d 10,667 July 31 Interest (10,000 × 10% for 4 months ) 333 2022 2022 Mar.31 Balance c/d 5,333 Mar. 31 Interest (5,000 × 10% for 8 months) 333 11,333 11,333 2022 2022 July 31 Bank A/c (5,000 + 333 + 167) 5,500 Apr. 01 Balance b/d 5,333 July 31 Interest (5,000 × 10% for 4months) 167 5,500 5,500

Working Notes:

WN1 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

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

Average profit =24,000+16,000+20,000+10,000+5000/5=15,000

Goodwill = Average Profit × Number of Years’ Purchase

= 15,000 × 3 =
` 45,000

Old Ratio = 3 : 2 : 1

Z died.

New Ratio (X and Y) = 3 : 1 and

Gaining Ratio = 3 : 2

Z’s Share in Goodwill = 45,000×1/6=7,500

This share of goodwill is to be distributed between X and Y in their gaining ratio (i.e. 3 : 1).

X’s Share of Goodwill = 7,500×3/5=4,500

Y’s Share of Goodwill = 7,500×2,5=3,000

WN3 Calculation Z’s Share of Profit

Profit for 2017-18 (Immediate Previous Year) =
` 24,000

Z’s Profit Share = 24,000×1/6×4/12=1,333

WN4

 Revaluation Account Dr. Cr. Particulars Amount ` Particulars Amount ` Sundry Debtors 1,000 Stock 1,000 Furniture 500 Building 5,000 Plant and Machinery 1,500 Bills Receivable 600 Profit transferred to: X’s Capital A/c 1,200 Y’s Capital A/c 800 Z’s Capital A/c 400 2,400 6,000 6,000

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