Page No 6.63:
Question 36:
X, Y and Z are
partners sharing profits in the ratio of 4 : 3 : 2.
Their Balance Sheet as at 31st March, 2021 stood as follows:
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Creditors |
24,140 |
Cash at Bank |
3,300 |
||
Capital A/cs: |
|
Sundry Debtors |
3,045 |
|
|
X |
12,000 |
|
Less: Provision for Doubtful Debts |
105 |
2,940 |
Y |
9,000 |
|
Stock |
4,800 |
|
Z |
6,000 |
27,000 |
Plant and Machinery |
5,100 |
|
|
|
|
Land and Building |
15,000 |
|
|
|
|
Y's Loan |
20,000 |
|
|
51,140 |
|
51,140 |
||
|
|
|
|
Y retired on 1st April, 2021 after giving due notice. Following
adjustments in the books of the firm were agreed:
(a) Land and Building be appreciated by 10%.
(b) Provision for Doubtful Debts is no longer necessary since all the debtors
are good.
(c) Stock be appreciated by 20%.
(d) Adjustment be made in the accounts to rectify a mistake previously
committed whereby Y was credited in excess by ` 810, while X and Z
were debited in excess of `
420 and ` 390
respectively.
(e) Goodwill of the firm be valued at ` 5,400 and Y's
share of the same be adjusted to that of X and Z who were
going to share in the ratio of 2 : 1.
(f) It was decide by X and Y to settle Y's
account immediately on his retirement.
Prepare: (i) Revaluation Account; (ii) Partner's
Capital Accounts and (iii) Balance Sheet of the firm after Y's
retirement.
Answer:
Revaluation Account |
|||||
Dr. |
|
Cr. |
|||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
||
Profit transferred to : |
|
Land and Building (15,000 × 10%) |
1,500 |
||
X’s Capital
A/c |
1,140 |
|
Provision for Doubtful Debts |
105 |
|
Y’s Capital
A/c |
855 |
|
Stock (4,800 × 20%) |
960 |
|
Z’s Capital
A/c |
570 |
2,565 |
|
|
|
|
2,565 |
|
2,565 |
||
|
|
|
|
||
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
Y’s Capital A/c |
1,200 |
|
600 |
Balance b/d |
12,000 |
9,000 |
6,000 |
X’s Capital A/c (Rectification) |
|
420 |
|
Revaluation A/c (Profit) |
1,140 |
855 |
570 |
Z’s Capital A/c (Rectification) |
|
390 |
|
X’s Capital A/c (Goodwill) |
|
1,200 |
|
Y’s Loan A/c |
|
10,845 |
|
Z’s Capital A/c (Goodwill) |
|
600 |
|
Balanced c/d |
12,360 |
|
6,360 |
Y’s Capital A/c (Rectification) |
420 |
|
390 |
|
13,560 |
11,655 |
6,960 |
|
13,560 |
11,655 |
6,960 |
|
|
|
|
|
|
|
|
Balance Sheet |
||||
as on March 31, 2021 (after Y’s
Retirement) |
||||
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
|
Creditors |
24,140 |
Cash at Bank |
3,300 |
|
|
|
Sundry debtors |
3,045 |
|
|
|
Stock (4,800 + 960) |
5,760 |
|
Capital A/cs: |
|
Plant and Machinery |
5,100 |
|
X |
12,360 |
|
Land and Building |
|
Z |
6,360 |
18,720 |
(15,000 + 1,500) |
16,500 |
|
42,860 |
|
42,860 |
|
|
|
|
|
Working Note:
1.Adjustment of Goodwill
Old Ratio (X, Y and Z) = 4 : 3 : 2
Y retires from the firm.
∴
Gaining Ratio = 4 : 2 or 2 : 1
Goodwill of the firm = `
5,400
Y’s Share of Goodwill = 5,400 ×3/9=1,800
This share of goodwill is to be distributed between X and Z in their gaining
ratio (i.e. 2 : 1).
X‘s
share= 1,800×2/3=1,200
Z‘s
share= 1,800×1/3=600
2. Computation of final settlement amount payable to/ receivable from
Y after his retirement:
Existing Loan against Y = 20,000
Less: Amount payable = 10,845
9,155
Amount receivable from Y by the firm = `.9,155
Page No 6.63:
Question 37:
A,
B and C are partners sharing profits and losses in the ratio
of 4 : 3 : 3. Their Balance Sheet as at 31st March, 2021 is:
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Creditors |
7,000 |
Land and Building |
36,000 |
||
Bills Payable |
3,000 |
Plant and Machinery |
28,000 |
||
Reserves |
20,000 |
Computer Printer |
8,000 |
||
Capital A/cs: |
|
Stock |
20,000 |
||
A |
32,000 |
|
Sundry Debtors |
14,000 |
|
B |
24,000 |
|
Less: Provision for Doubtful Debts |
2,000 |
12,000 |
C |
20,000 |
76,000 |
Bank |
2,000 |
|
|
|
|
|
|
|
|
1,06,000 |
|
1,06,000 |
||
|
|
|
|
On 1st April, 2021, B retired from the firm on the following terms:
(a) Goodwill of the firm is to be valued at ` 14,000.
(b) Stock, Land and Building are to be appreciated by 10%.
(c) Plant and Machinery and Computer Printer are to be reduced by 10%.
(d) Sundry Debtors are considered to be good.
(e) There is a liability of ` 2,000 for the payment of outstanding salary to
the employees of the firm. This liability was not provided in the Balance Sheet
but the same is to be recorded now.
(f) Amount payable to B is to be transferred to his Loan Account.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet
of A and C after B's retirement.
Answer:
Revaluation Account |
|||||
Dr. |
|
Cr. |
|||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
||
Plant and Machinery |
2,800 |
Stock |
2,000 |
||
Electronic Typewriter |
800 |
Land and Building |
3,600 |
||
Outstanding Salary |
2,000 |
Provision for Doubtful Debts |
2,000 |
||
Profit transferred to: |
|
|
|
||
A’s Capital
A/c |
800 |
|
|
|
|
B’s Capital
A/c |
600 |
|
|
|
|
C’s Capital
A/c |
600 |
2,000 |
|
|
|
|
|
|
|
||
|
7,600 |
|
7,600 |
||
|
|
|
|
||
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
B’s Capital A/c |
2,400 |
|
1,800 |
Balance b/d |
32,000 |
24,000 |
20,000 |
B’s Loan A/c |
|
34,800 |
|
Reserves |
8,000 |
6,000 |
6,000 |
Balance c/d |
38,400 |
|
24,800 |
Revaluation A/c |
800 |
600 |
600 |
|
|
|
|
A’s Capital A/c |
|
2,400 |
|
C’s Capital A/c |
|
1,800 |
|
||||
|
40,800 |
34,800 |
26,600 |
|
40,800 |
34,800 |
26,600 |
|
|
|
|
|
|
|
|
Balance Sheet |
|||
an on April 01, 2021 (after B’s
Retirement) |
|||
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
Creditors |
7,000 |
Land and Building (36,000 + 3,600) |
39,600 |
Bills Payable |
3,000 |
Plant and Machinery (28,000 – 2,800) |
25,200 |
B’s Loan |
34,800 |
Electronic Typewriter 8000 – 800) |
7,200 |
Capital A/c: |
|
Stock (20,000 + 2,000) |
22,000 |
A |
38,400 |
Sundry Debtors |
14,000 |
C |
24,800 |
Bank |
2000 |
Outstanding Salary |
2,000 |
|
|
|
1,10,000 |
|
1,10,000 |
|
|
|
|
Working Note:
Adjustment of Goodwill
Old Ratio (A, B and C) = 4 : 3 : 3
B retires from the firm.
∴
Gaining Ratio = 4 : 3
Goodwill of the firm = `
14,000
B’s Share of Goodwill = 14,000×3/10=42,000
This share of goodwill is to be distributed between A and C in their gaining
ratio (i.e. 4 : 3).
A‘s share= 4,200×4/7=2,400
C‘s share= 4,200×3/7=1,800
Page No 6.64:
Question 38:
Following is the Balance Sheet of X, Y and
Z as at 31st March, 2021. They shared profits in the ratio of 3 : 3 : 2:
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Sundry Creditors |
2,50,000 |
Cash at Bank |
50,000 |
||
General Reserve |
80,000 |
Bills Receivable |
60,000 |
||
Partners' Loan A/cs: |
|
Debtors |
80,000 |
|
|
X |
50,000 |
Less: Provision for Doubtful Debts |
4,000 |
76,000 |
|
Y |
40,000 |
Stock |
|
1,24,000 |
|
Capital A/cs: |
|
Fixed Assets |
|
3,00,000 |
|
X |
1,00,000 |
|
Advertisement Suspense A/c |
16,000 |
|
Y |
60,000 |
|
Profit and Loss A/c |
4,000 |
|
Z |
50,000 |
2,10,000 |
|
|
|
|
|
|
|
|
|
|
6,30,000 |
|
6,30,000 |
||
|
|
|
|
On 1st April, 2021, Y decided to retire from the firm on the
following terms:
(a) Stock to be reduced by `
12,000.
(b) Advertisement Suspense Account to be written off.
(c) Provision for Doubtful Debts to be increased to ` 6,000.
(d) Fixed Assets be appreciated by 10%.
(e) Goodwill of the firm, valued at ` 80,000 and the amount due
to the retiring partners be adjusted in X's and Z's Capital
Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet
to give effect to the above.
Answer:
Revaluation
Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
|||
Stock |
12,000 |
Fixed Assets (3,00,000 × 10%) |
30,000 |
|||
Provision for Doubtful Debts (6,000 – 4,000) |
2,000 |
|
|
|||
Profit transferred to: |
|
|
|
|||
X’s Capital A/c |
6,000 |
|
|
|
||
Y’s Capital A/c |
6,000 |
|
|
|
||
Z’s Capital A/c |
4,000 |
16,000 |
|
|
||
|
30,000 |
|
30,000 |
|||
|
|
|
|
|||
Partners’ Capital Account |
||||||||
Dr. |
|
Cr. |
||||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
|
Profit
and Loss A/c |
1,500 |
1,500 |
1,000 |
Balance
b/d |
1,00,000 |
60,000 |
50,000 |
|
Advertise
Suspense A/c |
6,000 |
6,000 |
4,000 |
General
Reserve |
30,000 |
30,000 |
20,000 |
|
Y’s
Capital A/c |
18,000 |
|
12,000 |
Revaluation
A/c |
6,000 |
6,000 |
4,000 |
|
Y’s Loan
A/c |
|
1,58,500 |
|
X’s
Capital A/c |
|
18,000 |
|
|
Balance
c/d |
1,10,500 |
|
57,000 |
Z’s
Capital A/c |
|
12,000 |
||
|
|
|
|
|
||||
|
1,36,000 |
1,26,000 |
74,000 |
|
1,36,000 |
1,26,000 |
74,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|||||
as on April 01, 2021 (after Y’s
Retirement) |
|||||
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Sundry Creditors |
2,50,000 |
Cash at Bank |
50,000 |
||
X’s Loan |
50,000 |
Bills Receivable |
60,000 |
||
Y’s Loan |
1,58,500 |
Debtors |
80,000 |
|
|
Capital A/c : |
|
Less: Prov. For D.D. |
(6,000) |
74,000 |
|
X |
1,10,500 |
|
Stock (1,24,000 – 12,000) |
1,12,000 |
|
Z |
57,000 |
1,67,500 |
Fixed Assets |
3,30,000 |
|
|
|
(3,00,000 + 30,000) |
|
||
|
6,26,000 |
|
6,26,000 |
||
|
|
|
|
Y’s Loan Account |
|||||
Dr. |
|
Cr. |
|||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
||
|
|
Balance b/d |
40,000 |
||
Balance c/d |
1,58,500 |
Y’s Capital A/c |
1,18,500 |
||
|
1,58,500 |
|
1,58,500 |
||
|
|
|
|
||
Working Notes:
WN 1 Adjustment of Goodwill
|
X |
|
Y |
|
Z |
Old ratio= |
3 |
: |
3 |
: |
2 |
Gaining ratio= |
3 |
|
: |
|
2 |
Y’s share of Goodwill =80,000 ×3/8=30,000
X's Gain
of Goodwill =30,000 ×3/5=18,000
Z's Gain
of Goodwill ==30,000
×2/5=12,000
WN 2 Distribution of General Reserve
X‘s
share= 80,000×3/8=30,000
Y‘s
share= 80,000×3/8=30,000
Z‘s
share= 80,000×2/8=20,000
WN3 Writing-off Advisement Suspense
X‘s
share= 16,000×3/8=6,000
Y‘s
share= 16,000×3/8=6,000
Z‘s
share= 16,000×2/8=4,000
WN4 Writing-off Profit and Loss (Loss)
X‘s
share= 4,000×3/8=1,500
Y‘s
share= 4,000×3/8=1,500
Z‘s
share= 4,000×2/8=1,000
Page No 6.64:
Question 39:
X, Y and Z are
partners sharing profits and losses in the ratio of 3 :
2 : 1. Balance Sheet of the firm as at 31st March, 2021 was as follows:
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Creditors |
21,000 |
Cash at Bank |
5,750 |
||
Workmen Compensation Reserve |
12,000 |
Debtors |
40,000 |
|
|
Investments Fluctuation Reserve |
6,000 |
Less: Provision for Doubtful Debts |
2,000 |
38,000 |
|
Capital A/cs: |
|
Stock |
|
30,000 |
|
X |
68,000 |
|
Investment (Market Value ` 17,600) |
15,000 |
|
Y |
32,000 |
|
Patents |
10,000 |
|
Z |
21,000 |
1,21,000 |
Machinery |
50,000 |
|
|
|
Goodwill |
6,000 |
||
|
|
Advertisement Expenditure |
5,250 |
||
|
|
|
|
|
|
|
1,60,000 |
|
1,60,000 |
||
|
|
|
|
Z retired on 1st April, 2021 on the following terms:
(a) Goodwill of the firm is to be valued at ` 34,800.
(b) Value of Patents is to be reduced by 20% and that of machinery to 90%.
(c) Provision for doubtful debts is to be created @ 6% on debtors.
(d) Z took over the investment at market value.
(e) Liability for Workmen Compensation to the extent of ` 750 is to be created.
(f) A liability of
` 4,000 included in creditors is not to be paid.
(g) Amount due to Z to be paid as follows: `
5,067 immediately, 50% of the balance within one year and the balance by a
draft for 3 Months.
Give necessary Journal entries for the treatment of goodwill, prepare
Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
2021 |
|
|
|
|
|
April 01 |
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 Goodwill A/c |
|
|
|
6,000 |
|
(Existing goodwill written off) |
|
|
|
|
|
|
|
|
|
|
April 01 |
X’s Capital A/c |
Dr. |
|
3,480 |
|
|
Y’s Capital A/c |
Dr. |
|
2,320 |
|
|
To Z’s Capital A/c |
|
|
|
5,800 |
|
(Z’s share of goodwill credited to him and gaining
partners debited in gaining ratio) |
|
|
|
|
|
|
|
|
|
|
Revaluation Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
|||
Patents |
2,000 |
Investments (17,600 – 15,000) |
2,600 |
|||
Machinery |
5,000 |
Creditors |
4,000 |
|||
Prov. for Doubtful Debts |
400 |
Loss on Revaluation transferred |
|
|||
|
|
X’s Capital A/c |
400 |
|
||
|
|
Y’s Capital A/c |
267 |
|
||
|
|
Z’s Capital A/c |
133 |
800 |
||
|
|
|
|
|||
|
7,400 |
|
7,400 |
|||
|
|
|
|
|||
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||||
Dr. |
|
Cr. |
|||||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
||
Goodwill A/c |
3,000 |
2,000 |
1,000 |
Balance b/d |
68,000 |
32,000 |
21,000 |
||
Revaluation A/c |
400 |
267 |
133 |
X’s Capital A/c |
|
|
3,480 |
||
Z’s Capital A/c |
3,480 |
2,320 |
|
Y’s Capital A/c |
|
|
2,320 |
||
Advertisement Expenditure A/c |
2,625 |
1,750 |
875 |
Workmen Compensation Reserve A/c* |
5,625 |
3,750 |
1,875 |
||
Investments A/c |
|
|
17,600 |
Investment Fluctuation Reserve A/c* |
3,000 |
2,000 |
1,000 |
||
Bank A/c |
|
|
5,067 |
|
|
|
|
||
Z’s Loan A/c |
|
|
2,500 |
|
|
|
|
||
Bills Payable A/c |
|
|
2,500 |
|
|
|
|
||
Balance c/d |
67,120 |
31,413 |
|
|
|
|
|
||
|
76,625 |
37,750 |
29,625 |
|
76,625 |
37,750 |
29,625 |
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2021 after Z’s
retirement |
|||||
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Creditors |
17,000 |
Cash at Bank (5,750 – 5,067) |
683 |
||
Workmen Compensation Claim |
750 |
Stock |
30,000 |
||
Bills Payable |
2,500 |
Patents |
8,000 |
||
Capital A/c’s: |
|
|
Debtors A/c |
40,000 |
|
X |
67,120 |
|
Less: Prov. for D/ful
Debts |
2,400 |
37,600 |
Y |
31,413 |
98,533 |
Machinery |
45,000 |
|
Z’s Loan |
2,500 |
|
|
||
|
1,21,283 |
|
1,21,283 |
||
|
|
Note: Amount due to Z = (21,000+3,480+2,320+1,875+1,000) - (1,000+133+875+17,600) =10,067Amout paid on Retirement immediately: ` 5,067
Amount paid within one year: 50% of 5,000 = ` 2,500
Amount payable by Bills of Exchange: ` 2,500 (balance 50%)
Page No 6.65:
Question 40:
Ashok, Bhaskar
and Chaman were in partnership sharing
profits and losses equally. ‘Chaman' retires from the
firm. After adjustments, his Capital Account shows a credit balance of `
3,00,000 as on 1st April, 2018. Balance due to 'Chaman'
is to be paid in three equal annual instalments along with interest @ 10% p.a.
Prepare Chaman's Loan Account until he is
paid the amount due to him. The firm closes its books on 31st March every year.
Answer:
Dr. |
Chaman’s Loan A/c |
Cr. |
|||||
Date |
Particulars |
Amount ( `) |
Date |
Particulars |
Amount ( `) |
||
2019 |
|
|
2018 |
|
|
||
March 31 |
To Bank A/c (1,00,000 + 30,000) |
1,30,000 |
April 01 |
By Chaman’s Capital A/c |
3,00,000 |
||
March 31 |
To balance c/d |
2,00,000 |
2019 |
|
|
||
|
|
|
March 31 |
By Interest on Loan A/c |
30,000 |
||
|
|
|
|
(3,00,000 × 10/100) |
|
||
|
|
3,30,000 |
|
|
3,30,000 |
||
2020 |
|
|
2019 |
|
|
||
March 31 |
To Bank A/c (1,00,000 + 20,000) |
1,20,000 |
April 01 |
By balance b/d |
2,00,000 |
||
March 31 |
To balance c/d |
1,00,000 |
2020 |
|
|
||
|
|
|
March 31 |
By Interest on Loan A/c |
20,000 |
||
|
|
|
|
(2,00,000 × 10/100) |
|
||
|
|
2,20,000 |
|
|
2,20,000 |
||
2021 |
|
|
2020 |
|
|
||
March 31 |
To Bank A/c (1,00,000 + 10,000) |
1,10,000 |
April 01 |
By balance b/d |
1,00,000 |
||
|
|
|
2021 |
|
|
||
|
|
|
March 31 |
By Interest on Loan A/c
|
10,000 |
||
|
|
|
|
(1,00,000 × 10/100) |
|
||
|
|
1,10,000 |
|
|
1,10,000 |
||
|
|
|
|
|
|
||
Working Notes: Amount payable per Installment = ` (3,00,000/3) = ` 1,00,000
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Chapter-6: Retirement of a partner | 2021-2022
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