# 12th | Ts grewal 2021-2022 Question 54 to 56 | Retirement of a partner

#### Question 54:

Sushil, Satish and Samir are partners sharing profits in the ratio of 5 : 3 : 2. Satish retires on 1st April, 2021 from the firm, on which date capitals of Sushil, Satish and Samir after all adjustments are  ` 1,03,680,  ` 87,840 and  ` 26,880 respectively. The Cash and Bank Balance on that date was  ` 9,600. Satish is to be paid through amount brought in by Sushil and Samir in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be Sushil 3/5 and Samir 2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank balance of  ` 7,200 was to be maintained and pass the necessary Journal entries.

Total capital of firm before retirement = 1,03,680+87,840+26,880 = ` 2,18,400

Availability of cash = 9,600-7,200 (Minimum Balance) = ` 2,400

Combined new capital of Sushil and Samir =` 2,16,000

Sushil's new capital = 2,16,000×3/5=` 1,29,600

Existing capital of Sushil= ` 1,03,680

So, Sushil has to bring = 1,29,600−1,03,680= ` 25,920

Samir's new capital = 2,16,000×2/5=` 86,400

Existing capital of Samir = ` 26,880

So, Samir has to bring = 86,400−26,880=` 59,520

#### Question 55:

A, B and C are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2021 is:

 Liabilities Amount ( `) Assets Amount ( `) Creditors 30,000 Cash in Hand 18,000 Bills Payable 16,000 Debtors 25,000 General Reserve 12,000 Less: Provision for Doubtful Debts 3,000 22,000 Capital A/cs: Stock 18,000 A 40,000 Furniture 30,000 B 40,000 Machinery 70,000 C 30,000 1,10,000 Goodwill 10,000 1,68,000 1,68,000

B retires on 1st April, 2021 on the following terms:
(a) Provision for Doubtful Debts be raised by
` 1,000.
(b) Stock to be reduced by 10% and Furniture by 5%.
(c) Their is an outstanding claim of damages of
` 1,100 and it is to be provided for.
(d) Creditors will be written back by
` 6,000.
(e) Goodwill of the firm is valued at
` 22,000.
(f) B is paid in full with the cash brought in by A and C in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at
` 10,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C.

 Revaluation Account Dr. Cr. Particulars Amount ( `) Particulars Amount ( `) Provision for doubtful debts 1,000 Creditors 6,000 Stock Furniture 1,800 1,500 Outstanding claim of damage Capital a/c; A=600×3/6=300 B=600×2/6=200 C=600×1/6=100 1,100          600 6,000 6,000

 Partners’ Capital Account Dr. Cr. Particulars Kusum Sneh Usha Particulars Kusum Sneh Usha B’s Capital A/c 5,500 – 1,833 Balance b/d 40,000 40,000 30,000 Goodwill a/c 5,000 3,333 1,667 A’s capital a/c 4,286 5,500 4,286 Cash A/c – 48,200 – C’s Capital A/c 80,000 1,833 – Balance c/d 35,800 – 28,600 Revaluation a/c 300 200 100 General Reserve 6,000 4,000 2,000 46,300 51,533 32,100 46,300 51,533 32,100 Cash A/c – – 2,450 Balance b/d 35,800 – 28,600 Balance c/d 78,450 – 26,150 Cash A/c 42,650 – 78,450 28,600 78,450 28,600

 Balance Sheet as at March 31, 2021 Liabilities Amount ( `) Assets Amount ( `) Creditors 24,000 Cash in hand 10,000 Bills payables 16,000 Debtors          25,000 Outstanding claim of damage 1,100 Less; prov.       4,000 Stock 21,000 16,000 Capital A/c : Furniture 28,500 A 78,450 Machinery 70,000 C 26,150 1,04,600 1,45,700 1,45,700

Working Notes

WN 1 Calculation of New and Gaining Ratio

Old Ratio (A,B and C) = 3:2:1
New Ratio (A, C) = 3:1
Gaining Ratio = New Ratio – Old Ratio
A‘s share= 3/4-3/6=18-12/24=6/24

C‘s share= 1/4-1/6=6-4/24=2/24

Therefore gaining Ratio (A, C) = 3:1

Total Goodwill of the Firm = 22,000
B’s Share of Goodwill = 22,000×2/6  =7,333

A will compensate =7,333×3/4=5,500

C will compensate =7,333×1/4=1,833

Tatal capital of the firm =35,800+48,200+28,600-(18,000-10,000)=1,04,600

A‘s new capital= 1,04,600×3/4=78,450
C
‘s new capital= 1,04,600×1/4=26,150

WN4

Closing bank balance =18,000+42,650-48,200-2,450=10,000

#### Question 56:

The Balance Sheet of Asha, Deepa and Leta who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2021 is as follows:

 Liabilities ` Assets ` Creditors 50,000 Cash at Bank 40,000 Employees' Provident Fund 10,000 Sundry Debtors 1,00,000 Profit and Loss A/c 85,000 Stock 80,000 Capital A/cs: Fixed Assets 60,000 Asha 40,000 Deepa 62,000 Leta 33,000 1,35,000 2,80,000 2,80,000

Asha retired on 1st April, 2021 and
Deepa and Leta decided to share profits in future in the ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at
` 80,000.
(b) Fixed Assets are to be depreciated to  ` 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim, included in Creditors for  ` 10,000, is settled at
` 8,000.
The amount to be paid to Asha by
Deepa and Leta in such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of  ` 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners' Capital Accounts.

 Revaluation Account Dr. Cr. Particulars Amount ( `) Particulars Amount ( `) Fixed Assets A/c (60,000 – 57,500) 2,500 Creditors (10,000 – 8,000) 2,000 Provision for Doubtful Debts 5,000 Loss on Revaluation transferred to: Asha’s Capital a/c 2,750 Deepa’s Capital a/c 1,650 Leta’s Capital a/c 1,100 5,500 7,500 7,500

 Partners’ Capital Accounts Dr. Cr. Particulars Asha Deepa Leta Particulars Asha Deepa Leta Revaluation A/c (Loss) 2,750 1,650 1,100 Balance b/d 40,000 62,000 33,000 Asha’s Capital A/c – 24,000 16,000 Profit & Loss A/c 42,500 25,500 17,000 Balance c/d 1,19,750 61,850 32,900 Deepa’s Capital A/c 24,000 – – Leta’s Capital A/c 16,000 – – 1,22,500 87,500 50,000 1,22,500 87,500 50,000 Bank A/c 1,19,750 – – Balance b/d 1,19,750 61,850 32,900 Balance c/d – 1,18,500 79,000 Bank A/c – 56,650 46,100 1,19,750 1,18,500 79,000 1,19,750 1,18,500 79,000

Working Notes

WN 1 Calculation of Gaining Ratio

Old Ratio (Asha, Deepa and Leta) = 5:3:2

New Ratio (Deepa and Leta) = 3:2

Gaining Ratio = New Ratio – Old Ratio

 Deepa’s =3/5-3/10 =3/10 Leta’s =2/5-2/10 =2/10

Hence, gaining ratio is 3: 2.

Total Goodwill of the Firm = 80,000

Asha’s Share of Goodwill = 80,000×5/10=40,000

To be borne by Gaining partners in their Gaining Ratio i.e. 3:2
Deepa’s Share = 40,000×3/5=24,000
Leta’s Share = 40,000×2/5=16,000

Asha’s Capital before adjustment = 1,19,750

Deepa’s Capital before adjustment = 61,850

Leta’s Capital before adjustment = 32,900

Total Capital of New Firm= Asha's Capital+Deepa's Capital+Leta's Capital+Closing balance of Bank Account-Available Bank Balance=1,19,750+61,850+32,900+15,000-32,000=
` 1,97,500

New profit sharing ratio=3:2

Deepa’s Share of Goodwill =1,97,500×3/5=1,18,500

Leta’s Share of Goodwill =1,97,500×2/5=79,000

 Particulars Deepa Leta New Capital Balance 1,18,500 79,000 Adjusted Old Capital Balance 61,850 32,900 Cash brought in by the Partner 56,650 46,100

WN4

 Cash at Bank A/c Dr. Cr. Particulars Amount ( `) Particulars Amount ( `) Balance b/d 40,000 Creditors 8,000 Deepa’s Capital A/c 56,650 Asha’s Capital A/c 1,19,750 Leta’s Capital A/c 46,100 Balance c/d 15,000 1,42,750 1,42,750

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