Page No 5.91:

Question 51:

X and Y are partners sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share of profits. At the time of admission of Z, Investments appeared at ` 80,000. Half of the investments to be taken by X and Y in their profit-sharing ratio at book value. Remaining investments were valued at ` 50,000. Pass the necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `

	X’s Capital A/c	Dr.		24,000
	Y’s Capital A/c	Dr.		16,000
	To Investments A/c				40,000
	(Half of the investments taken over by X and Y)

	Investment A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Value of investments increased)

	Revaluation A/c	Dr.		10,000
	To X’s Capital A/c				6,000
	To Y’s Capital A/c				4,000
	(Profit on revaluation transferred to Partners’ Capital A/c)

Page No 5.91:

Question 52:

X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share of profits. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at ` 76,000 and ` 8,000 respectively. ` 6,000 of the debtors proved bad. A provision of 5% is to be created on Sundry Debtors for doubtful debts. Pass the necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `

	Bad Debts A/c	Dr.		6,000
	To Debtors A/c				6,000
	(Bad debts incurred)

	Provision for Doubtful Debts A/c	Dr		6,000
	To Bad Debts A/c				6,000
	(Bad debts adjusted)

	Revaluation A/c (WN 1)	Dr.		1,500
	To Provision for Doubtful Debts A/c				1,500
	(Provision created)

	X’s Capital A/c	Dr.		900
	Y’s Capital A/c	Dr.		600
	To Revaluation A/c				1,500
	(Loss on revaluation transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Provision for Doubtful Debts
Provision to be created = (76,000 - 6,000)×5100= ` 3,500

Old Provision = ` 2,000

New Provision to be created = 3,500 - 2,000 = 1,500

Page No 5.91:

Question 53:

At the time of admission of a partner C, assets and liabilities of A and B were revalued as follows:
(a) A Provision for Doubtful Debts @10% was made on Sundry Debtors (Sundry Debtors   ` 50,000).
(b) Creditors were written back by   ` 5,000.
(c) Building was appreciated by 20% (Book Value of Building   ` 2,00,000).
(d) Unrecorded Investments were valued at   ` 15,000.
(e) A Provision of   ` 2,000 was made for an Outstanding Bill for repairs.
(f) Unrecorded Liability towards suppliers was   ` 3,000.
Pass necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `

	Creditors A/c	Dr.		5,000
	Building A/c	Dr.		40,000
	Investments A/c	Dr.		15,000
	To Revaluation A/c				60,000
	(Increase in assets and decrease in liabilities transferred to Revaluation Account)

	Revaluation A/c	Dr.		10,000
	To Provision for Doubtful Debts A/c				5,000
	To Reserve for outstanding Repairs Bill A/c				2,000
	To Creditors A/c				3,000
	(Increase in liabilities, decrease in assets and creation of reserves and provisions transferred to Revaluation Account)

	Revaluation A/c	Dr.		50,000
	To Old Partners’ Capital A/c				50,000
	(Profit on Revaluation transferred to Partners’ Capital)

Page No 5.91:

Question 54:

X and Y were partners in a firm sharing profits and losses in the ratio of 2 : 1. Z was admitted for 1/3rd share in the profits. On the date of Z's admission, the Balance Sheet of X and Y showed General Reserve of ` 2,50,000 and a credit balance of ` 50,000 in Profit and Loss Account. Pass necessary Journal entries on the treatment of these items on Z's admission.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
	General Reserve A/c	Dr.		2,50,000
	Profit and Loss A/c	Dr.		50,000
	To X’s Capital A/c				2,00,000
	To Y’s Capital A/c				1,00,000
	(Adjustment of balance in General Reserve A/c and P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of General Reserve & P&L A/c

X's share=3,00,000×23=2,00,000, Y's share=3,00,000×13=1,00,000

Page No 5.91:

Question 55:

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2019, they admit Z as a partner for 1/5th share in profits. On that date, there was a balance of ` 1,50,000 in General Reserve and a debit balance of ` 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries regarding adjustment of reserve and accumulated profit/loss.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019 April 1	General Reserve A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Adjustment of balance in General Reserve A/c in old ratio)

	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		8,000
	To Profit and Loss A/c				20,000
	(Adjustment of debit balance in P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of General Reserve

X's share=1,50,000×35=90,000 , Y's share=1,50,000×25=60,000

WN2 Calculation of Share of Debit Balance in P&L A/c

X's share=20,000×35=12,000, Y's share=20,000×25=8,000