12th | Ts grewal 2021-2022 Question 46 to 50 | Retirement of a partner

Page No 6.67:

Question 46:  X, Y and Z were in partnership sharing profits in proportion to their capitals. Their Balance Sheet as on

31st March, 2018 was as follows:

Liabilities		`	Assets		`
Sundry Creditors		16,600	Cash		15,000
Workmen's Compensation Fund		9,000	Debtors	21,000
General Reserve		6,000	Less: Provision for Doubtful Debts	(1,400)	19,600
Capitals:			Stock		19,000
X Y Z	90,000 60,000 30,000	1,80,000	Machinery Building		58,000 1,00,000
		2,11,600			2,11,600

On the above date, Y retired owing to ill health. The following adjustments were agreed upon for calculation of amount due to Y:

(a) Provision for Doubtful Debts to be increased to 10% of Debtors.

(b) Goodwill of the firm be valued at 36,000 and be adjusted into the Capital Accounts of X and Z, who will share profits in future in the ratio of 3 :1.

(c)Included in the value of Sundry Creditors was `2,500 for an outstanding legal claim, which will not arise.

(d) X and Z also decided that the total capital of the new firm will be `1,20,000 in their profit-sharing ratio. Actual cash to be brought in or to be paid off as the case may be.

(e) Y to be paid `9,000 immediately and balance to be transferred to his Loan Account.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm after Y's retirement.

(CBSE Sample Paper 2019)

 

Answer:

Revaluation Account
Dr.						Cr.
Particulars		Amount ( `)	Particulars		Amount ( `)
To provision for doubtful debts		700	By sundry creditors		2,500
To capital a/c – Profit transferred;  X=1800×3/6=900
y=1800×2/6=600
Z=1800×1/6=300		1,800
		2,500			2,500

  

Partners’ Capital Accounts
Dr.								Cr.
Particulars		X	Y	Z	Particulars	X	Y		Z
To Y’s capital a/c		9,000		3,000	By Balance b/c	90,000	60,000		30,000
To Cash a/c			9,000		By X’s Capital a/c		9,000
To Y’s loan a/c			68,600		By Z’s Capital a/c		3,000
To  Balance C/d		89,400		29,800	By Workers’ compensation fund	4,500	3,000		1,500
					By General reserve	3,000	2,000		1,000
					By Revaluation a/c	900	600		300
		98,400	77,600	32,800		98,400	77,600		32,800
To  Balance C/d		90,000		30,000	By Balance b/d	89,400			29,800
					By Cash a/c	600			200
		90,000		30,000		90,000			30,000

 

 

Balance Sheet as on April 01, 2018 after Z’s retirement
Liabilities		Amount ( `)	Assets		Amount ( `)
Sundry creditors		14,100	Cash a/c (15,000-9000+600+200)		6,800
Capital a/c			Debtors                            21,000 Less; Prov. For D.D.        2,100		18,900
X= 90,000 Z= 30,000		1,20,000	Stock Machinery		19,000 58,000
Y’s loan a/c		68,600	Buildings		1,00,000
		2,02,700			2,02,700

Working notes;

WN-1 Calculation of new and gaining ratio

Old ratio of X,Y and Z =90,0000:60,000:30,000=3:2:1

New ratio of X and Z= 3:1

Gaining ratio= New ratio- Old ratio

X’s gain = ¾- 3/6 =18-12/24=6/24

Z’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= 36,000

Y will be compensated for 36,000×2/6=12,000

X will compensate =12,000×3/4=9,000

Z will compensate =12,000×1/4=3,000

 

Condition for goodwill treatment: Remaining partner to retiring partner

X’s capital     a/c	Dr.	9,000
Z’s capital     a/c	Dr.	3,000
To Y’s capital a/c			12,000

WN-3 Capital adjustment

X’s capital = 1,20,000×3/4=90,000

Z’s capital = 1,20,000×1/4=30,000

 

Page No 6.67:

Question 47:

Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:
 

Liabilities		Amount ( `)	Assets		Amount ( `)
Sundry Creditors		12,600	Bank		4,100
Provident Fund		3,000	Debtors	30,000
General Reserve		9,000	Less: Provision	1,000	29,000
Capital A/cs:
Amit	40,000		Stock		25,000
Balan	36,500		Investments		10,000
Chander	20,000	96,500	Patents		5,000
			Machinery		48,000
		1,21,100			1,21,100

 
It was agreed that:
(i)  Goodwill will  be valued at  ` 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%. 
(iv) Liability on account of Provident Fund was estimated at  ` 2,400.
(v) Chander took over Investments for  ` 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement. 

 

Answer:

Revaluation Account
Dr.						Cr.
Particulars			Amount `	Particulars	Amount `
Machinery			4,800	Investments A/c	5,800
Patents			1,000	Provident Fund A/c	600
Profit transferred to:
Amit’s Capital A/c		300
Balan’s Capital A/c		200
Chander’s Capital A/c		100	600
			6,400		6,400

 

Partners’ Capital Account
Dr.				Cr.
Particulars	Amit	Balan	Chander	Particulars	Amit	Balan	Chander
Investments A/c			15,800	Balance b/d	40,000	36,500	20,000
Chander’s Capital A/c	2,700	1,800		Revaluation A/c (Profit)	300	200	100
Loan A/c			10,300	General Reserve	4,500	3,000	1,500
Current A/c		5,900		Amit’s Capital A/c			2,700
Balance c/d	48,000	32,000		Balan’s Capital A/c			1,800
				Current A/c	5,900
	50,700	39,700	26,100		50,700	39,700	26,100

 

Working Notes:

WN1: Adjustment of Goodwill

Chander’s share of Goodwill =27,000 ×1/6=4,500

Amit wil pay=4,500×3/5=2,700

Balan wil pay=4,500×2/5=1,800

 

WN2 Adjustment of Capital
Adjusted Old Capital of Amit=44,800 (40,000+4,500+300)-2,700=` 42,100

Adjusted Old Capital of Balan=39,700 (36,500+3,000+200)-1,800=` 37,900

Total Adjusted Capital=42,100+37,900=` 80,000

New Profit Sharing Ratio=3:2

Amit's New Capital=80,000×3/5=` 48,000

Balan's New Capital=80,000×2/5=` 32,000

Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.

 

Page No 6.68:

Question 48:

J, H and K were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2015, their Balance Sheet was as follows:
 

Liabilities		Amount ( `)	Assets		Amount ( `)
Creditors		42,000	Land and Building		1,24,000
Investment Fluctuation Fund		20,000	Motor Vans		40,000
Profit and Loss Account		80,000	Investments		38,000
Capital A/cs: J	1,00,000		Machinery		24,000
H	80,000		Stock		30,000
K	40,000	2,20,000	Debtors	80,000
			Less: Provision	6,000	74,000
			Cash		32,000
		3,62,000			3,62,000

On the above date, H retired and J and K agreed to continue the business on the following terms:
(i) Goodwill of the firm was valued at  ` 1,02,000.
(ii) There was a claim of  ` 8,000 for workmen's compensation.
(iii) Provision for bad debts was to be reduced by  ` 2,000. 
(iv) H will be paid  ` 14,000 in cash and balance will be transferred in his Loan Account which will be paid in four equal yearly instalments together with interest @ 10% p.a.
(v) The new profit-sharing ratio between J and K will be 3 : 2 and their capitals will be in their new profit-sharing ratio. The capital adjustments will be done by opening Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

 

Answer:

Revaluation Account
Dr.						Cr.
Particulars		Amount `	Particulars		Amount `
Claim for Workmen Comp.		8,000	Provision for Doubtful Debts		2,000
			Loss on Revaluation
			J’s Capital A/c	3,000
			H’s Capital A/c	1,800
			K’s Capital A/c	1,200	6,000
		8,000			8,000

 

Partners’ Capital Account
Dr.								Cr.
Particulars	J	H	K	Particulars	J	H	K
Revaluation A/c	3,000	1,800	1,200	Balance b/d	1,00,000	80,000	40,000
H’s Capital A/c	10,200		20,400	IFF	10,000	6,000	4,000
Cash A/c		14,000		P&L A/c	40,000	24,000	16,000
H’s Loan A/c		1,24,800		J’s Capital		10,200
Balance c/d	1,36,800		38,400	K’s Capital		20,400
	1,50,000	1,40,600	60,000		1,50,000	1,40,600	60,000
Current A/c	31,680			Balance b/d	1,36,800		38,400
Balance c/d	1,05,120		70,080	Current A/c			31,680
	1,36,800		70,080		1,36,800		70,080

 

Balance Sheet as on March 31, 2015
Liabilities		Amount (`)	Assets		Amount (`)
Creditors		42,000	Land and Building		1,24,000
Capitals:			Motor Vans		40,000
J	1,05,120		Investments		38,000
K	70,080	1,75,200	Machinery		24,000
J’s Current A/c		31,680	Stock		30,000
Claim for Workmen Compensation		8,000	Debtors	80,000
H’s Loan A/c		1,24,800	Less: Provision	4,000	76,000
			Cash (32,000 - 14,000)		18,000
			K’s Current A/c		31,680
		3,81,680			3,81,680

 

Working Notes:

WN1: Calculation of Gaining Ratio

Gaining ratio=New ratio –old ratio

J’s	=3/5-5/10
	=1/10
k’s	=2/5-2/10
	=2/10

Gaining ratio=1:2

WN2: Adjustment of Goodwill

H’s share of Goodwill =1,02,000×3/10=30,600

30,600 will be debited to gaining partners J and K in 1:2 ratio

j‘s share= 30,600×1/3=10,200

K‘s share= 30,600×2/3=20,400

 

WN3 Adjustment of Capital
Adjusted capital of J=1,00,000+10,000+40,000-3,000-10,200=1,36,800

Adjusted capital of K=40,000+4,000+16,000-1,200-20,400=38,400

Total Adjustment of Capital =1,36,800+38,400=1,75,200

J‘s new capital = 1,75,200×3/5=1,05,120

K‘s new capital = 1,75,200×2/5=70,080

K‘s new capital > K‘s adjuted capital  ( k owes to firm `. 31,680)

J‘s new capital < J‘s adjusted capital( Firm owes to J ` 31,680)

 

WN4 Amount transferred to H’s Loan A/c

Amount to be transferred = (Credit side - Debit side) - Cash Paid

                                         = (1,40,600 - 1,800) - 14,000 = ` 1,24,800

Page No 6.69:

Question 49:

N, S and B are partners in a firm sharing profits and losses in the proportion of 1/2 : 1/6 : 1/3 respectively. The Balance Sheet of the firm as at On 31st March, 2017,was as follow:
 

BALANCE SHEET OF N,S AND B as at 31st march, 2017
Liabilities		Amount ( `)	Assets		Amount ( `)
Bills Payable		12,000	Freehold Premises		40,000
Sundry Creditors		18,000	Machinery		30,000
General Reserve		12,000	Furniture		12,000
Capital A/cs:			Stock		22,000
N	30,000		Sundry Debtors	20,000
S	30,000		Less: Provision for Doubtful Debts	1,000	19,000
B	28,000	88,000	Cash		7,000
		1,30,000			1,30,000

 
B retired from the business on the above date and the partners agree to the following:
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ` 1,500.
(d) Goodwill of the firm is valued at ` 21,000 on B's retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of B. Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.

 

Answer:

Revaluation Account
Dr.					Cr.
Particulars			Amount ( `)	Particulars	Amount ( `)
Machinery (30,000 × 10%) Furniture (12,000 × 7%)			3,000 840	Freehold Premises (40,000 × 20%)	8,000
Provision for Doubtful Debts			1,500	Stock (22,000 × 15%)	3,300
Profit transferred to:
N’s Capital A/c		2,980
S’s Capital A/c		993
B’s Capital A/c		1,987	6,960
			11,300		11,300

 

Partner’s Capital Accounts
Dr.							Cr.
Particulars	N	S	B	Particulars	N	S	B
B’s Capital A/c	5,250	1,750		Balance b/d	30,000	30,000	28,000
B’s Loan A/c			40,987	General Reserve	6,000	2,000	4,000
Balance c/d	33,730	31,243	40,987	N’s Capital A/c (Goodwill)			5,250
				B’s Capital A/c (Goodwill)			1,750
				Revaluation A/c (Profit)	2,980	993	1,987
	38,980	32,993	40,987		38,980	32,993	40,987
Y’s Current A/c		7,500		Balance b/d	33,730	31,243
Balance c/d	48,730	16,243		X’s Current A/c	15,000
	48,730	31,243			48,730	31,243

 

Balance Sheet as on 1st April, 2017
Liabilities		Amount ( `)	Assets		Amount ( `)
Bills Payable		12,000	Freehold Premises (40,000 + 8,000)		48,000
Sundry Creditors		18,000	Machinery (30,000 – 3,000)		27,000
B’s Loan		40,987	Furniture (12,000 – 840)		11,160
Capital A/cs:			Stock (22,000 + 3,300)		25,300
N	48,730		Sundry Debtors	20,000
S	16,243	64,973	Less: Provision for Doubtful Debts	(2,500)	18,500
S’s Current A/c		15,000	Cash		7,000
			N’s Current A/c		15,000
		1,50,960			1,50,960

Working Notes: 

WN 1 Calculation of Profit Sharing Ratio

Old Ratio (N, S and B) = 3 : 1 : 2

B retires from the firm.

∴ New Ratio (N and S) = 3 : 1 and

Gaining Ratio = 3 : 1

WN 2 Adjustment of Goodwill

Goodwill of the firm = ` 21,000

B’s Share of Goodwill = = 21,000×2/6=7,000

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

N‘s share= 7,000×3/4=5,250

S‘s share= 7,000×1/4=1,750

 

Condition for goodwill treatment; gaining partner to retiring partner

N’s capital a/c            Dr.                5,250
S’s Capital a/c           Dr.                1,750

   To B’s Capital a/c                                   7,000

WN 3 Adjustment of Partners’ Capital after B’s Retirement

Combined Capital of N and S after all adjustments = 33,730 + 31243 = `. 64,973

New Ratio = 3 : 1

N‘s new capital = 64,973×3/4=48,730

S‘s new capital = 64,973×1/4=16,243

 

Page No 6.69:

Question 50: Leena, Madan and Naresh were partners in a firm sharing profits and losses in the ratio of 2:2 :3. On 31st March, 2015, their Balance Sheet was as follows:

BALANCE SHEET as at 31st March, 2015
Liabilities		`	Assets	`
Trade Creditors		1,60,000	Land and Building	10,00,000
Bank Overdraft		44,000	Machinery	5,00,000
Long-term Debts		4,00,000	Furniture	7,00,000
Employees' Provident Fund		76,000	Investments	2,00,000
Capitals:			Closing Stock	8,00,000
Leena	12,50,000
Madan	8,00,000		Sundry Debtors	4,00,000
Naresh	10,50,000	31,00,000	Bank	80,000
			Deferred Advertisement Expenditure	1,00,000
		37,80,000		37,80,000

On 31st March, 2015, Madan retired from the firm and the remaining partners decided to carry on the

business. It was decided to revalue assets and liabilities as under:

(i) Land and Building be appreciated by `2,40,000 and Machinery be depreciated by 10%.

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

(iii) An old customer Mohit whose account was written off as bad debt had promised to pay `7,000 in settlement of his full debt of `10,000.

(iv) Provision for Doubtful Debts was to be made at 5% on debtors.

(v) Closing Stock will be valued at market price which is `1,00,000 less than the book value.

(vi) Goodwill of the firm be valued at `5,60,000 and Madan's share of goodwill be adjusted in the accounts of Leena and Naresh. Leena and Naresh decided to share future profits and losses in the ratio of 3:2.

(vii) The total capital of the new firm will be `32,00,000 which will be in the proportion of the profit sharing ratio of Leena and Naresh.

(vii) Amount due to Madan was settled by accepting a Bill of Exchange in his favour payable after 4 months.

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

(AI 2016 C)

 

Answer:

Revaluation Account
Dr.					Cr.
Particulars			Amount ( `)	Particulars	Amount ( `)
Machinery Provision for D.D. Capital – profit transferred to; Leena = 70,000×2/7=20,000 Madan = 70,000×2/7=20,000 Naresh = 70,000×3/7=30,000			50,000 1,00,000       70,000	Land and building	2,40,000
			2,40,000		2,40,000

 

Partner’s Capital Accounts
Dr.							Cr.
Particulars	Leena	Madan	Naresh	Particulars	Leena	Madan	Naresh
To Madan’s capital a/c To Naresh’s capital a/c To Def. Adv. exp. A/c	1,60,000 16,000 28,571	28,571	42,858	By Balance b/d By Leena’s capital a/c By Revaluation a/c	12,50,000   20,000	8,00,000 160,000 20,000	10,50,000 16,000 30,000
To Investment a/c		1,00,000
To bills payables a/c		8,51,429
To Balance C/d	10,65,429		10,53,142
	12,70,000	9,80,000	10,96,000		12,70,000	9,80,000	10,96,000
To Balance C/d	19,20,000		12,80,000	By Balance b/d By Cash a/c	10,65,429 8,54,571		10,53,142 2,26,858
	19,20,000		12,80,000		19,20,000		12,80,000

 

Balance Sheet as on 1st April, 2015
Liabilities		Amount ( `)	Assets		Amount ( `)
Trade creditors Bank overdraft Long-term Debts Employees provident fund		160,000 44,000 4,00,000 76,000	Land and building Machinery Furniture Investment Closing Stock		12,40,000 4,50,000 7,00,000 1,00,000 7,00,000
Capital Leena = 1920,000 Naresh= 12,80,000		32,00,000	Debtors                                  4,00,000 Less; prov. For D.D.                20,000 Cash (80,000+8,54,571+2,26,858)		3,80,000 11,61,429
Bills payables		8,51,429
		47,31,429			47,31,429

Working Notes: 

WN 1 Calculation of Profit Sharing Ratio

Old Ratio (Leena , Madan and Naresh) = 2 : 2 : 3
New Ratio (Leena and Naresh) = 3 : 2 and

Madan retires from the firm.

Gaining ratio= new ratio- old ratio

Leena’s = 3/5-2/7=21-10/35=11/35 (gain)
Naresh’s =2/5- 3/7=14-15/35= -1/35 (Sacrifice)

WN 2 Adjustment of Goodwill

Goodwill of the firm = ` 5,60,000

Madan will be compensated =5,60,000×2/7=1,60,000

Naresh will be compensated =5,60,000×1/35=16,000

Leena will compensate =5,60,000×11/35=1,76,000

 

Condition for goodwill treatment; gaining partner to retiring partner

Leena’s capital a/c            Dr.                176,000

   To Madan’s Capital a/c                                   1,60,000

   To Naresh’s Capital a/c                                      16,000

WN 3 Adjustment of Partners’ Capital after Madan’s Retirement

leena’s capital= 32,00,000×3/5=19,20,000

Naresh’s capital= 32,00,000×2/5=12,80,000

 

 

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

Chapter-6: Retirement of a partner | 2021-2022

From Question 1 to 5
From Question 6 to 10
From Question 11 to 15
From Question 16 to 20
From Question 21 to 25
From Question 26 to 30
From Question 31 to 35
From Question 36 to 40
From Question 41 to 45
From Question 46 to 50
From Question 51 to 53
From Question 54 to 56

Jump to chapter list of solution-2021-22

Jump to chapter list of solution-2020-21
Jump to chapter list of solution-2019-20