Question 21:
M,
N and O are partners in a firm sharing profits in
the ratio of 3 : 2 : 1. Goodwill has been valued
at ` 60,000. On N's
retirement, M and O agree to share profits equally. Pass the
necessary Journal entry for treatment of N's share of goodwill.
Answer:
|
Journal |
|||||
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Date |
Particulars |
L.F. |
Debit (`) |
Credit (`) |
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O’s Capital A/c |
Dr. |
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20,000 |
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To N’s Capital A/c |
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20,000 |
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|
(Being Adjustment of N’s share of goodwill) |
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Working Notes:
WN1:Calculation of
Gaining Ratio
M :N :O=3:2:1(Old ratio)
M :O =1:1(New ratio)
Gaining Ratio = New Ratio - Old Ratio
M's Gain =1/2−3/6=3−3/6=0
O's Gain=1/2−1/6=3−1/6=2/6
WN2: Calculation of Retiring Partner’s Share of Goodwill
N's share of goodwill=60,000×2/6=` 20,000
N's share of goodwill will be brought by O only.
Therefore, O's Capital A/c will be debited with ` 20,000
Question 22:
A, B, C and D
are partners in a firm sharing profits, in the ratio of 2 : 1 : 2 : 1. On the
retirement of C, Goodwill was valued ` 1,80,000. A, B
and D decide to share future profits equally. Pass the necessary
Journal entry for the treatment of goodwill.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit (`) |
Credit (`) |
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|
B’s Capital A/c |
Dr |
|
30,000 |
|
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D’s Capital A/c |
Dr. |
|
30,000 |
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To C’s Capital A/c |
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|
60,000 |
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(Being Adjustment of C’s share of goodwill) |
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Working Notes:
WN1:Calculation of Gaining Ratio
A :B :C :D=2:1:2:1(Old ratio)
A :B :D =1:1:1(New ratio)
Gaining Ratio = New Ratio - Old Ratio
A's Gain =1/3−2/6=2−2/6=0
B's Gain =1/3−1/6=2−1/6=1/6
D's Gain =1/3−1/6=2−1/6=1/6
A:B:D=0:1:1
WN2: Calculation of Retiring Partner’s Share of Goodwill
C's share of goodwill=1,80,000×2/6=` 60,000
C's share of goodwill will be brought by B and D in their gaining ratio1:1
Therefore, B's Capital A/c will be debited with 60,000×1/2=` 30,000
And, D's Capital A/c will be debited with 60,000×1/2=` 30,000
Question 23
A, B and C were
partners in a firm sharing profits in the ratio of 6 : 5 : 4. Their capitals
were A − `
1,00,000; B − ` 80,000 and C − `
60,000 respectively. On 1st April, 2009, A retired from the firm and
the new profit sharing ratio between B and C was decided as 1
: 4. On A's retirement, the goodwill of the firm was valued at ` 1,80,000. Showing your calculations clearly, pass the
necessary Journal entry for the treatment of goodwill on A's
retirement.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit (`) |
Credit (`) |
|
|
|
C’s Capital A/c |
Dr. |
|
96,000 |
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To A’s Capital A/c |
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72,000 |
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To B’s Capital A/c |
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24,000 |
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(Being Adjustment of A’s and B’s share of goodwill) |
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Working Notes:
WN1: Calculation of Gaining Ratio
A :B :C=6:5:4(Old ratio)
B :C=1:4 (New ratio)
Gaining Ratio = New Ratio - Old Ratio
B's Gain =1/5−5/15=3−5/15=
−2/15(Sacrifice)
C's Gain =4/5−4/15=1/2−4/15=8/15
WN2: Calculation of Retiring Partner’s Share of Goodwill
A's share of goodwill=1,80,000×6/15=` 72,000
B's share of goodwill=1,80,000×2/15=` 24,000
A's and B's share of goodwill be brought by C only.Therefore, C's Capital A/c will be debited with 72,000+24,000 = ` 96,000
Question 24:
Sangeeta, Saroj
and shanti are partners sharing profits and losses in the ratio of 5 :
3 : 2. Z retired and on the date of his retirement, following
adjustments were agreed upon:
(a) The value of Furniture is to be increased by ` 12,000.
(b) The value of stock to be decreased by ` 10,000.
(c) Machinery of the book value of ` 50,000 is to be depreciated by 10%.
(d) A Provision for Doubtful Debts @ 5% is to be created on debtors of book
value of ` 40,000.
(e) Unrecorded Investment worth `
10,000.
(f) An item of `
1,000 included in bills payable is not likely to be claimed, hence should be
written back.
Pass necessary Journal entries.
Answer:
|
Revaluation
Account |
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|
Dr. |
|
Cr. |
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Particulars |
` |
Particulars |
` |
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Stock A/c |
10,000 |
Furniture A/c |
12,000 |
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Machinery A/c |
5,000 |
Investments A/c |
10,000 |
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Provision for Doubtful Debts A/c |
2,000 |
Bills Payable A/c |
1,000 |
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Profit transferred to: |
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X’s Capital A/c |
3,000 |
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Y’s Capital A/c |
1,800 |
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Z’s Capital A/c |
1,200 |
6,000 |
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23,000 |
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23,000 |
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Journal |
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Date |
Particulars |
L.F. |
Debit |
Credit |
|
|
(a) |
Furniture A/c |
Dr. |
|
12,000 |
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To
Revaluation A/c |
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|
12,000 |
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(Being Increase in value transferred to Revaluation
Account) |
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(b) |
Revaluation A/c |
Dr. |
|
10,000 |
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To Stock
A/c |
|
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|
10,000 |
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(Being Decrease in Stock transferred to Revaluation
Account) |
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(c) |
Revaluation A/c |
Dr. |
|
5,000 |
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To
Machinery A/c |
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|
5,000 |
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(Being Decrease in value of machinery transferred to
Revaluation Account) |
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(d) |
Revaluation A/c |
Dr. |
|
2,000 |
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To Provision for Doubtful
Debts A/c |
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2,000 |
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(Being Increase in liabilities to Revaluation Account) |
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(e) |
Investments A/c |
Dr. |
|
10,000 |
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To Revaluation A/c |
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10,000 |
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(Being Increase in value transferred to Revaluation
Account) |
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(f) |
Bills Payable A/c |
Dr. |
|
1,000 |
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To Revaluation A/c |
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1,000 |
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(Being Decrease in liabilities transferred to Revaluation
Account) |
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(g) |
Revaluation A/c |
Dr. |
|
6,000 |
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To X’s Capital A/c |
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3,000 |
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To Y’s Capital A/c |
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1,800 |
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To Z’s Capital A/c |
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1,200 |
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(Being Revaluation profit transferred to Partners’ Capital
Accounts) |
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Question 25:
A, B and C were
partners, sharing profits and losses in the ratio of 2 : 2 : 1. B decides
to retire on 31st March, 2022. On the date of his retirement, some of the
assets and liabilities appeared in the books as follows:
Creditors `
70,000; Building `
1,00,000; Plant and Machinery `
40,000; Stock of Raw Materials `
20,000; Stock of Finished Goods `
30,000 and Debtors ` 20,000.
Following was agreed among the partners on B's retirement:
(a) Building to be appreciated by 20%.
(b) Plant and Machinery to be reduced by 10%.
(c) A Provision of 5% on Debtors to be created for Doubtful Debts.
(d) Stock of Raw Materials to be valued at ` 18,000 and Finished Goods at ` 35,000.
(e) An Old Computer previously written off was sold for ` 2,000 as scrap.
(f) Firm had to pay `
5,000 to an injured employee.
Pass necessary Journal entries to record the above adjustments and prepare the
Revaluation Account.
Answer:
|
Revaluation
Account |
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|
Dr. |
|
Cr. |
||||
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Particulars |
( `) |
Particulars |
( `) |
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|
Plant and Machinery (40,000 × 10%) |
4,000 |
Building (1,00,000 × 20%) |
20,000 |
|||
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Provision for Doubtful Debts |
1,000 |
Stock of Finished Goods |
5,000 |
|||
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Stock of Raw Materials |
2,000 |
Computer |
2,000 |
|||
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Workmen’s Compensation Claim |
5,000 |
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Profit transferred to: |
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A’s Capital A/c |
6,000 |
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B’s Capital A/c |
6,000 |
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C’s Capital A/c |
3,000 |
15,000 |
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|
27,000 |
|
27,000 |
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Journal |
||||
|
Particulars |
L.F. |
Debit ( `) |
Credit ( `) |
|
|
Building A/c |
Dr. |
|
20,000 |
|
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Stock of Finished Good A/c |
Dr. |
|
5,000 |
|
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Computer A/c |
Dr. |
|
2,000 |
|
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To Revaluation A/c |
|
|
27,000 |
|
|
(Being Increase in value Assets transferred to Revaluation
Account) |
|
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|
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Revaluation A/c |
Dr. |
|
12,000 |
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To Plant and Machinery A/c |
|
|
4,000 |
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To Provision for Doubtful Debts A/c |
|
|
1,000 |
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To Stock of Raw Material A/c |
|
|
2,000 |
|
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To Workmen’s Compensation Claim A/c |
|
|
5,000 |
|
|
((Being Decrease in value of Assets and increase in
Liabilities transferred to Revaluation Account) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
15,000 |
|
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To A’s Capital A/c |
|
|
6,000 |
|
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To B’s Capital A/c |
|
|
6,000 |
|
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To C’s Capital A/c |
|
|
3,000 |
|
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((Being Revalution Profit
transferred to Partners’ Capital accounts) |
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