Page No 5.91:
Question 56:
(a) X, Y
and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit W as partner for 1/6th
share. Following is the extract of the Balance Sheet on the date of admission:
Liabilities |
` |
Assets |
` |
General Reserve |
36,000 6,000 18,000 |
Advertisement Suspense A/c |
24,000
|
Pass necessary Journal entries.
(b) Give the Journal entry to distribute 'Workmen Compensation Reserve'
of ` 72,000 at the time of admission of Z, when there is no claim
against it. The firm has two partners X and Y.
(c) Give the Journal entry to distribute 'Workmen Compensation Reserve'
of ` 72,000 at the time of admission of Z, when there is claim
of ` 48,000 against it. The firm has two partners X and Y .
(d) Give the Journal entry to distribute 'Investment Fluctuation Reserve'
of ` 24,000 at the time of admission of Z, when Investment (Market
Value ` 1,10,000) appears at ` 1,20,000. The firm has two
partners X and Y.
(e) Give the Journal entry to distribute 'General Reserve' of ` 4,800 at the time of
admission of Z, when 20% of General Reserve is to be transferred to
Investment Fluctuation Reserve. The firm has two partners X and Y .
(f) A, B and C were partners sharing
profits and losses in the ratio of 6 : 3 : 1. They
decide to take D into partnership with effect from 1st April, 2019.
The new profit-sharing ratio between A, B, C and D
will be 3 : 3 : 3 : 1. They also decide to record the
effect of the following without affecting their book values, by passing a
single adjustment entry:
|
Book Values ` |
General Reserve |
1,50,000 |
Contingency Reserve |
60,000 |
Profit and Loss A/c (Cr.) |
90,000 |
Advertisement Suspense A/c (Dr.) |
1,20,000 |
Pass the necessary single adjustment entry,
through the Partner's Current Account.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
2019 |
|
|
|
|
|
April 1 |
General Reserve A/c |
Dr. |
|
36,000 |
|
|
Contingency Reserve A/c |
Dr. |
|
6,000 |
|
|
Profit & Loss A/c |
Dr. |
|
18,000 |
|
|
To
X’s Capital A/c |
|
|
|
30,000 |
|
To
Y’s Capital A/c |
|
|
|
18,000 |
|
To
Z’s Capital A/c |
|
|
|
12,000 |
|
(Reserves distributed) |
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
12,000 |
|
|
Y’s Capital A/c |
Dr. |
|
7,200 |
|
|
Z’s Capital A/c |
Dr. |
|
4,800 |
|
|
To
Advertisement Suspense A/c |
|
|
|
24,000 |
|
(Advertisement Suspense distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
General Reserve A/c |
Dr. |
|
84,000 |
|
|
To
A’s Capital A/c |
|
|
|
48,000 |
|
To
B’s Capital A/c |
|
|
|
36,000 |
|
(General Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
|
A’s Capital A/c |
Dr |
|
4,800 |
|
|
B’s Capital A/c |
Dr. |
|
3,600 |
|
|
To Profit
& Loss A/c |
|
|
|
8,400 |
|
(Profit & Loss A/c distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Workmen Compensation Reserve A/c |
Dr. |
|
72,000 |
|
|
To
X’s Capital A/c |
|
|
|
36,000 |
|
To
Y’s Capital A/c |
|
|
|
36,000 |
|
(Workmen Compensation Reserve
distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Workmen Compensation Reserve A/c |
Dr. |
|
72,000 |
|
|
To
Workmen Compensation Claim A/c |
|
|
|
48,000 |
|
To
X’s Capital A/c |
|
|
|
12,000 |
|
To
Y’s Capital A/c |
|
|
|
12,000 |
|
(Surplus Workmen Compensation
Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Investment Fluctuation Reserve A/c |
Dr. |
|
24,000 |
|
|
To
Investment A/c |
|
|
|
10,000 |
|
To
X’s Capital A/c |
|
|
|
7,000 |
|
To
Y’s Capital A/c |
|
|
|
7,000 |
|
(Surplus Investment Fluctuation
Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
General Reserve A/c |
Dr. |
|
4,800 |
|
|
To
Investment Fluctuation Reserve A/c |
|
|
|
960 |
|
To
X’s Capital A/c |
|
|
|
1,920 |
|
To
Y’s Capital A/c |
|
|
|
1,920 |
|
(Surplus General Reserve
distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
C’s Current A/c |
Dr. |
|
36,000 |
|
|
D’s Current A/c |
Dr. |
|
18,000 |
|
|
To A’s Current
A/c |
|
|
|
54,000 |
|
(Adjustment entry made) |
|
|
|
Working
Notes:
WN1: Calculation of Sacrifice or Gain
A :B :C=6:3:1 (Old Ratio)
A :B :C :D:=3:3:3:1 (New Ratio)
Sacrificing (or Gaining) Ratio = Old Ratio - New Ratio
A's share=610−310=6−310=310 (Sacrifice)
B's share=310−310=0
C's share=110−310=1−310=−210 (Gain)
D's share=0−110=−110 (Gain)
WN2: Calculation of Net Effect
General Reserve |
1,50,000 |
Contingency Reserve |
60,000 |
Profit and Loss A/c (Cr.) |
90,000 |
|
3,00,000 |
Less: Advertisement Suspense A/c (Dr.) |
1,20,000 |
|
1,80,000 |
WN 3: Adjustment of Net Effect
Amount credited in A's Current A/c = 1,80,000×310=
` 54,000
Amount debited in C's Current A/c = 1,80,000×210=
` 36,000
Amount debited in D's Current A/c = 1,80,000×110=
` 18,000
Page No 5.92:
Question 57:
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount
` |
Credit Amount
` |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
3,3000 |
|
|
To W’s
capital A/c To
Premium for Goodwill A/c |
|
|
|
1,8000 1,5000 |
|
(Being C’s brought his share of goodwill and capital in
cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
1,5000 |
|
|
To X’s
Capital A/c To Y’s
Capital A/c To Z’s
Capital A/c |
|
|
|
5000 5000 5000 |
|
(Being A’s share of Goodwill transferred in their
sacrificing Ratio) |
|
|
|
|
Revaluation A/c Dr. To Motor A/c To Furniture
A/c (Being decrease in value assets transferred to
Revaluation a/c) |
2700 |
2500 200 |
|||
X’s Capital A/c Dr. Y’s Capital A/c Dr. Z’s Capital A/c Dr. To Revaluation
A/c (Being loss of Revaluation of transferred to old
partners capital a/c) |
900 900 900 |
2700 |
|||
|
|
|
|
|
Working notes;
WN-1
Memorandum balance sheet is prepared to find out Cash
balance.
Liabilities |
` |
Assets |
` |
|
Liabilities |
30,000 |
Cash balance (Balancing figure) |
2200 |
|
X's Capital |
15,000 |
|
Motor |
1,2000 |
Y's Capital Z’s Capital |
17,500 20,000 |
5,250 |
furniture Stock |
4000 2,6500 |
|
|
|
Debtors |
3,7800 |
|
8,250 |
8,2500 |
||
|
|
|
|
|
WN-2
Old ratio of X:Y:Z=1;1;1
W is admitted for ¼ share
Let total profit =1
Remaining profit after W’s admission= 1-1/4=3/4
X=3/4×1/3=3/12
Y=3/4×1/3=3/12
Z=3/4×1/3=3/12
W=1/4×3/3=3/12
Therefore share of X, Y , Z and W=3:3:3:3=1:1:1:1
Sacrificing ratio= old –new
X=1/3-1/4=1/12
Y=1/3-1/4=1/12
Z=1/3-1/4=1/12
Sacrificing ratio of X, Y , Z = 1:1:1
WN-4
Particulars |
` |
Particulars |
` |
To Motors A/c To Furniture A/c |
2500 200 |
By Loss Capital a/c X=2700×1/3=900 Y=2700×1/3=900 (In old Ratio) |
2700 |
|
2700 |
|
2700 |
WN-5
Partners’ Capital a/c |
|||||||||
Particulars |
X ` |
Y ` |
Z ` |
W ` |
Particulars |
X ` |
Y ` |
Z ` |
W ` |
To ravaluation a/c To balance c/d |
900 19,100 |
900 21,600 |
900 24,100 |
1,8000 |
By balance b/d By Cash a/c By Premium a/c |
15,000 5000 |
17,500 5000 |
20,000 5000 |
18,000 |
|
20,000 |
22,500 |
25,000 |
18,000 |
|
20,000 |
22,500 |
25,000 |
18,000 |
Page No 5.92:
Question 58:
A and B are carrying on
business in partnership and sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 stood
as:
|
||||
Liabilities |
` |
Assets |
` |
|
Creditors |
11,800 |
Cash |
1,500 |
|
A's Capital |
51,450 |
|
Stock |
28,000 |
B's Capital |
36,750 |
88,200 |
Debtors |
19,500 |
|
|
|
Furniture |
2,500 |
|
|
|
Machinery |
48,500 |
|
|
|
|
|
|
|
|
|
|
|
|
1,00,000 |
|
1,00,000 |
|
|
|
|
|
They admit C into partnership on 1st April, 2019 and give him 1/8th
share in future profits on the following terms:
(a) Goodwill of the firm be valued at twice the average of the last three
years' profits which amounted to ` 21,000; ` 24,000 and ` 25,560.
(b) C is to bring cash for the amount of his share of goodwill.
(c) C is to bring cash ` 15,000 as his capital.
Pass Journal entries recording these transactions, draw out the Balance Sheet
of the new firm and determine new profit-sharing ratio.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
2019 |
|
|
|
|
|
|
To C’s
Capital A/c |
|
|
15,000 |
|
|
To
Premium for Goodwill A/c |
|
|
5,880 |
|
|
(C brought capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
5,880 |
|
|
To A’s
Capital A/c |
|
|
3,528 |
|
|
To B’s
Capital A/c |
|
|
2,352 |
|
|
(Premium for Goodwill distributed between |
|
|
|
|
|
|
|
|
|
Partners’ Capital Account |
|||||||
Dr. |
|
|
|
Cr. |
|||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
51,450 |
36,750 |
|
|
|
|
|
Cash |
|
|
15,000 |
Balance c/d |
54,978 |
39,102 |
15,000 |
Premium for |
3,528 |
2,352 |
|
|
54,978 |
39,102 |
15,000 |
|
54,978 |
39,102 |
15,000 |
|
|
|
|
|
|
|
|
Balance Sheet after Admission of C |
||||
Liabilities |
Amount ` |
Assets |
Amount ` |
|
Capital: |
|
Cash (1,500 + 20,880) |
22,380 |
|
A |
54,978 |
|
Stock |
28,000 |
B |
39,102 |
|
Debtors |
19,500 |
C |
15,000 |
1,09,080 |
Furniture |
2,500 |
Creditors |
|
11,800 |
Machinery |
48,500 |
|
|
1,20,880 |
|
1,20,880 |
|
|
|
|
|
Calculation of New Profit Sharing Ratio
|
A |
|
B |
Old ratio= |
3
|
: |
2
|
C is admitted for 1/8 share of profit
Let combined share of all partners after admission of C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
=1-1/8
=7/8
New ratio= old ratio × combined share of X
and Y
A’s |
=3/5×7/8 |
|
=21/40 |
B’s |
=2/5×7/8 |
|
=14/40 |
|
X |
|
Y |
|
Z |
New profit sharing ratio= |
21/40 |
: |
14/40 |
: |
1/8 |
= |
21/40 |
: |
14/40 |
: |
5/40 |
= |
21 |
: |
14 |
: |
5 |
Working Note-
WN1
Calculation of goodwill
Average
profit =21,000+25,000+25,560/3=23,520
Goodwill=
Average profit × no. of purchases years’
Goodwill= 23,520×2 =47,040
C‘s of goodwill=47,040×1/8 =5,880
WN2
Distribution
of premium of goodwill
A will get
=5,880×3/5=3528
B will get
=5,880×2/5=2352
Page No 5.93:
Question 59:
Following was the Balance
Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2019:
|
||||
Liabilities |
` |
Assets |
` |
|
Capital A/cs: |
|
Building |
25,000 |
|
A |
15,000 |
|
Plant and Machinery |
17,500 |
B |
10,000 |
25,000 |
Stock |
10,000 |
Sundry Creditors |
|
32,950 |
Sundry Debtors |
4,850 |
|
|
|
Cash in Hand |
600 |
|
|
|
|
|
|
|
|
|
|
|
|
57,950 |
|
57,950 |
|
|
|
|
|
They admit C into partnership on the following terms:
(a) C was to bring ` 7,500 as his capital and ` 3,000 as goodwill for 1/4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry
Debtor ` 375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare
Profit and Loss Adjustment Account (or Revaluation Account), Partners' Capital
Accounts and Balance Sheet of the new firm.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
|
|
|
|
|
|
|
Profit and Loss Adjustment A/c |
Dr. |
|
1,750 |
|
|
To
Stock A/c |
|
|
500 |
|
|
To
Plant and Machinery A/c |
|
|
875 |
|
|
To
Reserve for Doubtful Debts A/c |
|
|
375 |
|
|
(Decrease in stock and Plant and creation of Reserve
for Doubtful Debt transferred to Profit and Loss Adjustment Account) |
|
|
|
|
|
|
|
|
|
|
|
Building A/c |
Dr. |
|
2,500 |
|
|
To
Profit and Loss Adjustment A/c |
|
|
2,500 |
|
|
(Increase in value of Building of transferred to Profit
and loss Adjustment Accounts) |
|
|
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment A/c |
|
750 |
|
|
|
To A’s
Capital A/c |
|
|
500 |
|
|
To B’s
Capital A/c |
|
|
250 |
|
|
(Profit on revaluation of asset and liabilities |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
10,500 |
|
|
To C’s
Capital A/c |
|
|
7,500 |
|
|
To
Premium for Goodwill A/c |
|
|
3,000 |
|
|
(C brought capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
3,000 |
|
|
To A’s
Capital A/c |
|
|
2,000 |
|
|
To B’s
Capital A/c |
|
|
1,000 |
|
|
(Premium for Goodwill distributed between |
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount ` |
Particulars |
Amount ` |
Stock |
500 |
|
|
Plant and Machinery |
875 |
Building |
2,500 |
Reserve for Doubtful Debts |
375 |
|
|
Profit transferred to |
|
|
|
A Capital |
500 |
|
|
B Capital |
250 |
|
|
|
2,500 |
|
2,500 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
15,000 |
10,000 |
|
|
|
|
|
Cash |
|
|
7,500 |
|
|
|
|
Premium for Goodwill |
2,000 |
1,000 |
|
Balance c/d |
17,500 |
11,250 |
7,500 |
Profit and Loss Adjustment (Profit) |
500 |
250 |
|
|
17,500 |
11,250 |
7,500 |
|
17,500 |
11,250 |
7,500 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2016 after admission
of C |
|||||
Liabilities |
Amount ` |
Assets |
Amounts ` |
||
|
|
|
|
||
Capital
Accounts: |
|
Building (25,000 + 2,500) |
27,500 |
||
A |
17,500 |
|
Plant and Machinery (17,500 – 875) |
16,625 |
|
B |
11,250 |
|
Stock (10,000 – 500) |
9,500 |
|
C |
7,500 |
36,250 |
|
|
|
Sundry Creditors |
32,950 |
Sundry Debtors |
4,850 |
|
|
|
|
Less: Provision for D. Debts |
375 |
4,475 |
|
|
|
Cash in Hand (600 + 10,500) |
11,100 |
||
|
69,200 |
|
69,200 |
||
|
|
|
|
Working Notes:
WN1
|
A |
B |
Sacrificing ratio |
2
: |
1 |
WN2
Distribution of Premium for Goodwill (in sacrificing ratio)
A will get =3,000×2/3=2,000
B will get =3,000×1/3=1,000
WN3
Distribution of Profit from Profit and loss Adjustment Account (in old
ratio)
A will get =750×2/3=500
B will get =750×1/3=250
Page No 5.93:
Question 60:
Given below is the Balance
Sheet of A and B, who are carrying on partnership business on
31st March, 2019. A and B share profits and losses in
the ratio of 2 : 1.
BALANCE SHEET OF A AND B |
||||
Liabilities |
` |
Assets |
` |
|
Bills Payable |
10,000 |
Cash in Hand |
10,000 |
|
Creditors |
58,000 |
Cash at Bank |
40,000 |
|
Outstanding Expenses |
2,000 |
Sundry Debtors |
60,000 |
|
Capital A/cs: |
|
Stock |
40,000 |
|
A |
1,80,000 |
|
Plant |
1,00,000 |
B |
1,50,000 |
3,30,000 |
Building |
1,50,000 |
|
4,00,000 |
|
4,00,000 |
|
|
|
|
|
C is admitted as a partner on 1st April, 2019 on the following terms:
(a) C will bring ` 1,00,000 as his capital and
` 60,000 as his share of
goodwill for 1/4th share in the profits.
(b) Plant is to be appreciated to ` 1,20,000 and the value of building is to be
appreciated by 10%.
(c) Stock is found overvalued by ` 4,000.
(d) A provision for doubtful debts is to be created at 5% of sundry debtors.
(e) Creditors were unrecorded to the extent of ` 1,000.
Pass the necessary Journal entries, prepare the Revaluation Account and
Partners' Capital Accounts, and show the Balance Sheet after the admission of C.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Amount ` |
Amount ` |
|
2019 |
Bank A/c |
Dr. |
|
1,60,000 |
|
Mar
31 |
To C’s Capital A/c |
|
|
1,00,000 |
|
|
To Premium for Goodwill A/c |
|
|
60,000 |
|
|
(Capital and premium for goodwill brought by C for 1/4
share) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
60,000 |
|
|
To A’s Capital A/c |
|
|
|
40,000 |
|
To B’s Capital A/c |
|
|
|
20,000 |
|
(Premium for Goodwill brought transferred to old
partners’ capital account in their sacrificing ratio) |
|
|
|
|
|
Plant A/c |
Dr. |
|
20,000 |
|
|
Building A/c |
Dr. |
|
15,000 |
|
|
To Revaluation A/c |
|
|
|
35,000 |
|
(Increase in value of assets) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
8,000 |
|
|
To Stock |
|
|
|
4,000 |
|
To Provision for Doubtful Debts A/c |
|
|
3,000 |
|
|
To Creditors A/c (Unrecorded) |
|
|
|
1,000 |
|
(Assets and liabilities revalued) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
27,000 |
|
|
To A’s Capital A/c |
|
|
|
18,000 |
|
To B’s Capital A/c |
|
|
|
9,000 |
|
(Profit on revaluation transferred
to old partners) |
|
|
|
Revaluation Account |
|||||
Dr. |
Cr. |
||||
Particulars |
Amount ` |
Particulars |
Amount ` |
||
Stock |
4,000 |
Plant |
20,000 |
||
Provision for Doubtful Debts |
3,000 |
Building |
15,000 |
||
Creditors (Unrecorded) |
1,000 |
|
|
||
Revaluation Profit |
|
|
|
||
A’s Capital |
18,000 |
|
|
|
|
B’s Capital |
9,000 |
27,000 |
|
|
|
|
35,000 |
|
35,000 |
||
|
|
|
|
||
Partners’ Capital Account |
||||||||
Dr. |
Cr. |
|||||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
Balance c/d |
2,38,000 |
1,79,000 |
1,00,000 |
Balance b/d |
1,80,000 |
1,50,000 |
|
|
|
|
|
|
Bank |
|
|
1,00,000 |
|
|
|
|
|
Premium for Goodwill |
40,000 |
20,000 |
|
|
|
|
|
|
Revaluation |
18,000 |
9,000 |
|
|
|
|
|
|
|
|
|
|
|
|
2,38,000 |
1,79,000 |
1,00,000 |
|
2,38,000 |
1,79,000 |
1,00,000 |
|
|
|
|
|
|
|
|
|
|
Balance
Sheet as
on March 31, 2019 |
|||||
Liabilities |
Amount ` |
Assets |
Amount ` |
||
Bills Payable |
10,000 |
Cash in Hand |
10,000 |
||
Creditors |
59,000 |
Cash at Bank |
2,00,000 |
||
Outstanding Expenses |
2,000 |
Sundry Debtors |
60,000 |
|
|
Capital: |
|
Less: Provision for Doubtful Debt |
3,000 |
57,000 |
|
A |
2,38,000 |
|
Stock |
36,000 |
|
B |
1,79,000 |
|
Plant |
1,20,000 |
|
C |
1,00,000 |
5,17,000 |
Building |
1,65,000 |
|
|
5,88,000 |
|
5,88,000 |
||
|
|
|
|
Note: Since no information is given about the share of
sacrifice, it is assumed that the old partners are sacrificing in their old
profit sharing ratio.