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

Page No 6.72:

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.

 

Answer:

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  

 



Page No 6.72:

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.

 

Answer:

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 


WN2 Adjustment of Goodwill


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

WN3 Adjustment of Capital

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

 



Page No 6.73:

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.

 

Answer:

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.

 

WN2 Adjustment of Goodwill

 

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

WN3 Adjustment of Capital


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