12th | Ts grewal 2021-2022 Question 41 to 45 | Retirement of a partner

Page No 6.65:

Question 41:

Rakesh retired from the firm. The amount due to him was determined at  ` 90,000. It was decided to pay the due amount as follows:
On the date of retirement −  ` 30,000
Balance in three yearly instalments − First two instalments being of  ` 26,000, including interest; and Balance amount as last instalment.
Interest was payable @ 10 p.a. Prepare retiring Partners' Loan Account.

 

Answer:

Dr.

Rakesh’s Loan A/c

Cr.

Date

Particulars

Amount

( `)

Date

Particulars

Amount

( `)

Year I

To Bank A/c (20,000 + 6,000)

26,000

Year I

By Y’s Capital A/c                          

60,000

 

To balance c/d

40,000

 

 

 

 

 

 

 

By Interest on Loan A/c                

6,000

 

 

 

 

(60,000 × 10/100)

 

 

 

66,000

 

 

66,000

 

 

 

 

 

 

Year II

To Bank A/c (22,000 + 4,000)

26,000

Year II  

By balance b/d

40,000

 

To balance c/d

18,000

 

 

 

 

 

 

 

By Interest on Loan A/c

4,000

 

 

 

 

(40,000 × 10/100)

 

 

 

44,000

 

 

44,000

 

 

 

 

 

 

Year III

To Bank A/c (18,000 + 1,800)

19,800

Year III

By balance b/d

18,000

 

 

 

 

 

 

 

 

 

 

By Interest on Loan A/c

1,800

 

 

 

 

(18,000 × 10/100)

 

 

 

19,800

 

 

19,800

 

 

 

 

 

 

 



Page No 6.65:

Question 42: Ram, Manohar and Joshi were partners in a firm. Manohar retired and his claim including his capital and share of goodwill was `1,80,000. There was an unrecorded furniture estimated at ` 9,000, half of which was given for an unrecorded liability of `18,000 in settlement of claim of `9,000 and remaining half was taken by Manohar at a discount of 10% in part satisfaction of his claim. Balance of Manohar's claim was discharged by bank draft. Pass necessary Journal entries to record the above transactions.

 

Answer:

Dete

Particulars

 

L.F.

Dr. `

Cr. `

 

B’s capital a/c

Dr.

 

4,050

 

  To Revaluation a/c

 

 

 

4,050

(Being unrecorded furniture taken over by partner B)

 

 

 

 

Revaluation a/c

Dr.

 

9,000

 

  To unrecorded liabilities a/c

 

 

 

9,000

(Being remaining unrecorded Liabilities  paid by partner)

 

 

 

 

B’s capital a/c

Dr.

 

1,650

 

  To Revaluation a/c

 

 

 

1,650

(Being loss on revaluation debited to B’s capital)

 

 

 

 

B’s capital a/c

Dr.

 

1,74,300

 

  To Bank a/c

 

 

 

1,74,300

(Being final amount paid to B’s capital on his retirement by bank draft)

 

 

 

 

Total

 

 

1,89,000

1,89,000

 

 

 

 

 

 



Page No 6.65:

Question 43:

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at  ` 2,10,000 in the profit-sharing ratio. The Capital Accounts of X and Z after all adjustments on the date of retirement showed balance of  ` 1,45,000 and  ` 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners.

 

Answer:

Old Ratio (X, Y, and Z) = 3 : 2 : 1

Y retires from the firm.  

∴New Ratio (X and Z) = 3 : 1 

Total capital of the New Firm = ` 2,10,000

X‘s new capital = 2,10,000×3/4=1,57,500

Z‘s new capital = 2,10,000×1/4=52,500

Ascertainment of Actual Cash to be brought in or to be paid to the partners

Particulars

X

Z

New Capital

1,57,500

52,500

Existing Capital

1,45,000

63,000

Cash Paid/Brought in

(12,500)

(Brought in)

10,500

(Paid)


 


 


 


 



Page No 6.66:

Question 44: Lisa, Monika and Nisha were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2019, their Balance Sheet was as follows:

BALANCE SHEET OF LISA, MONIKA and NISHA as at 31st March, 2019

Liabilities

 

`

Assets

`

Trade Creditors

 

1,60,000

Land and Building

10,00,000

Bills Payable

 

2,44,000

Machinery

12,00,000

Employees' Provident Fund

 

76,000

Stock

10,00,000

Capitals:

 

 

Sundry Debtors

4,00,000

Lisa 14,00,000

14,00,000

 

Bank

40,000

Monika

3,60,000

31,60,000

 

 

Nisha

 

 

 

 

 

 

36,40,000

 

36,40,000

On 31st March, 2019, Monika retired from the firm and the remaining partners decided to carry on the business. It was agreed that:

(I) Land and building be appreciated by `2,40,000 and machinery be depreciated by 10%

(ii) 50% of the stock was taken over by the retiring partner at book value.

(iii) Provision for doubtful debts was to be made at 5% on debtors

(iv) Goodwill of the firm be valued at `3,00,000 and Monika's share of goodwill be adjusted in the accounts of Lisa and Nisha.

(v) The total capital of the new firm be fixed at `27,00,000 which will be in the proportion of the new profit Sharing ratio of Lisa and Nisha. For this purpose, Current Accounts of the partners were to be opened.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm on Monika's retirement. (CBSE 2019)

 

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

To provision for doubtful debts

20,000

By land and building

2,40,000

To Machinery a/c

1,20,000

To capital a/c

Lisa’s =1,00,000×2/5=40,000

Monika’s =1,00,000×2/5=40,000

Nisha’s =1,00,000×1/5=20,000

(In old ratio)

 

 

 

1,00,000

 

 

 

 

 

2,40,000

2,40,000

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Accounts

 

Dr.

 

Cr.

 

Particulars

Lisa

Monika

Nisha

Particulars

Lisa

Monika

Nisha

To Monika’s capital a/c

To stock

To Monika’s loan a/c

To balance c/d

80,000

 

 

13,60,000

 

5,00,000

10,60,000

40,000

 

 

3,40,000

By Balance b/d

By Lisa’s capital a/c

By Nisha’s capital a/c

By revaluation a/c

14,00,000

 

 

40,000

14,00,000

80,000

40,000

40,000

3,60,000

 

 

20,000

14,40,000

15,60,000

3,80,000

14,40,000

15,60,000

3,80,000

 To balance c/d

18,00,000

9,00,000

By Balance b/d

By current a/c

13,60,000

4,40,000 

 

3,40,000 

5,60,000

18,00,000

9,00,000

18,00,000

9,00,000

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2021 after Monika’s retirement

Liabilities

Amount

( `)

Assets

Amount

( `)

Trade creditors

Bills payables

Employees provident fund

Capital a/c

Lisa= 18,00,000

Nisha= 9,00,000

1,60,000

2,44,000

76,000

 

 

27,00,000

Land and building

Machinery

Stock

Sundry debtors     4,00,000

Less; Provision           20,000

for Doubtful debts

Bank

Lisa’s current a/c

Nisha’s current a/c

12,40,000

10,80,000

5,00,000

 

3,80,000

 

40,000

4,40,000

5,60,000

Monika’s loan

10.,60,000

42,40,000

42,40,000

 

 

Working notes;

WN -1

Calculation of gaining and sacrificing ratio

 

Lisa

 

Monika

 

Nisha

Old ratio =

2

:

2

:

1

New ratio =

2

 

:

 

1

Gaining ratio = New ratio – Old ratio

Lisa’s gain = 2/3-2/5=10-6/15=4/15

Nisha’s gain = 1/3-1/5=5-3/15=2/15

Gaining ratio of Lisa and Nisha = 4:2=2:1

WN-2 Treatment of goodwill;

Firm’s goodwill =3,00,000

Monika will be compensated = 1,20,000×2/5=1,20,000

Lisa will compensate =1,20,000×2/3 = 80,000

Nisha will compensate =1,20,000×1/3 = 40,000

Condition for goodwill remaining partner to retiring partner

WN -3

Lisa’s capital = 27,00,000×2/3=18,00,000

Nisha’s capital = 27,00,000×1/3=9,00,000

 



Page No 6.66:

Question 45:  On 31st March, 2021, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:

Liabilities

 

`

Assets

 

`

Creditors

 

10,800

Cash at Bank

 

13,000

Bills Payable

 

5,000

Debtors

10,000

 

Capital A/cs:

 

 

Less: Provision for Doubtful Debts

200

9,800

A

45,000

 

Stock

 

9,000

B

15,000

 

Machinery

 

24,000

C

30,000

90,000

Freehold Premises

 

50,000

 

 

1,05,800

 

 

1,05,800

B retired on 1st April, 2021 and following adjustments were agreed to determine the amount payable to B:

(a) Out of the amount of insurance premium debited to Profit and Loss Account, `1,000 be carried forward as prepaid Insurance.

(b) Freehold Premises be appreciated by 10%.

(c) Provision for Doubtful Debts is brought up to 5% on Debtors.

(d) Machinery be reduced by 5%.

(e) Liability for Workmen Compensation to the extent of `1,500 would be created.

(f) Goodwill of the firm be fixed at `18,000 and B's share of the same be adjusted into the Capital Accounts of A and C, who will share future profits in the ratio of 3/4th and 1/4th.

(g)Total capital of the firm as newly constituted be fixed at `60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.

(h) B be paid `5,000 in cash and the balance be transferred to his Loan Account.

Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.

 

Answer:

Revaluation a/c

Dr.                                                                                                                                                Cr.

Particulars

`

Particulars

`

To provision for doubtful debts

300

By unexpired insurance

1,000

To Machinery

1,200

By freehold premises

5,000

To workers’ compensation liabilities

1,500

 

 

To capital a/c -profit transferred to :

 

 

 

A=3,000×3/6=1,500

 

 

 

B=3,000×2/6=1,000

 

 

 

C=3,000×1/6=500

3,000

 

 

 

6,000

 

6,000

 

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

To B’s capital a/c

4,500

1,500

By Balance b/d

45,000

30,000

15,000

To cash a/c

5,000

By A’s capital

4,500

To B’s loan a/c

32,000

By C’s Capital

1,500

To balance c/d

42,000

14,000

By Revaluation a/c

1,500

1,000

500

46,500

37,000

15,500

46,500

37,000

15,500

 To balance c/d

45,000 

 

15,000 

 By Balance b/d

42,000

14,000

By Bank a/c

3,000

1,000

 

 45,000

 

 15,000

 

 45,000

 

 15,000

 

 

Balance Sheet

as on April 01, 2021 after Z’s retirement

Liabilities

Amount

( `)

Assets

Amount

( `)

Creditors

10,800

Cash at bank

12,000

Bills payables

5,000

Debtors                      10,000

Workers’ Compensation liabilities

1,5000

Less; prov. For D.D.      500

9,500

Capital a/c

A

45,000

C

15,000

60,000

Stock

9,000

B’s loan

32,000

Unexpired insurance

1,000

Machinery

22,800

 

Freehold premises

 55,000

1,,09,300

1,,09,300

Working notes;

WN-1 Calculation of new and gaining ratio

Old ratio of A,B and C =45,0000:30,000:15,000=3:2:1

New ratio of A and C= 3:1

Gaining ratio= New ratio- Old ratio

A’s gain = ¾- 3/6 =18-12/24=6/24

C’s gain =1/4-1/6=6-4/24=2/24

Gaining ratio of A:C = 6:2=3:1

WN-2 treatment of Goodwill

Goodwill of the firm= 18,000

B will be compensated for 18,000×2/6=6,000

A will compensate =6,000×3/4=4,500

C will compensate =6,000×3/4=1,500

Condition for goodwill treatment: Remaining partner to retiring partner

WN-3 Capital adjustment

A’s capital = 60,000×3/4=45,000

C’s capital = 60,000×1/4=15,000

WN-4

Closing bank balance= 13,000-5,000+3,000+1,000=12,000