Volume-1 | Chapter-5 | Question: 71 to 75 | Admission Of A Partner | Ts grewal solution 2020-21 | Class-12th

Page No 5.98:

Question 71:

A and B are partners in a firm. The net profit of the firm is divided as follows: 1/2 to A, 1/3 to B and 1/6 carried to a Reserve. They admit C as a partner on 1st April, 2019 on which date, the Balance Sheet of the firm was:

 

Liabilities

   `

Assets

   `

Capital A/cs:

 

Building

50,000

A

50,000

 

Plant and Machinery

30,000

B

40,000

90,000

Stock

18,000

Reserve

 

10,000

Debtors

22,000

Creditors

 

20,000

Bank

5,000

Outstanding Expenses

 

5,000

 

 

 

 

 

 

 

 

 

1,25,000

 

1,25,000

 

 

 

 

 


Following are the required adjustments on admission of C:
(a) C brings in  
 ` 25,000 towards his capital.
(b) C also brings in  
 ` 5,000 for 1/5th share of goodwill.
(c) Stock is undervalued by 10%.
(d) Creditors include a liability of  
 ` 4,000, which has been decided by the court at    ` 3,200.
(e) In regard to the Debtors, the following Debts proved Bad or Doubtful−
 
 ` 2,000 due from X−bad to the full extent;
 
 ` 4,000 due from Y−insolvent, estate expected to pay only 50%.
You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.



Answer:

Revaluation Account

Dr.

 

 

Cr.

Particulars

Amount

 `

Particulars

Amount

 `

Bad Debts

2,000

Stock

2,000

Provision for Doubtful Debts

2,000

Creditors (4,000 – 3,200)

800

(4,000 × 50%)

 

 

 

 

 

Loss transferred to

 

 

 

   A Capital

720

 

 

   B Capital

480

 

4,000

 

4,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

Revaluation

720

480

 

Balance b/d

50,000

40,000

 

 

 

 

 

Reserve

6,000

4,000

 

 

 

 

 

Bank

 

 

25,000

Balance c/d

58,280

45,520

25,000

Premium for Goodwill

3,000

2,000

 

 

59,000

46,000

25,000

 

59,000

46,000

25,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2019 after C’s admission

Liabilities

Amount

 `

Assets

Amount

 `

Capital A/cs:

 

Building

50,000

A

58,280

 

Plan and Machinery

30,000

B

45,520

 

Stock (18,000 × 100/90)

20,000

C

25,000

1,28,800

Debtors

22,000

 

Creditors (20,000 – 800)           

19,200

Less: Bad Debts

2,000

 

Outstanding Expenses

5,000

Less: Prov. for D. Debts

2,000

18,000

 

 

Bank (5,000 + 30,000)

35,000

 

1,53,000

 

1,53,000

 

 

 

 


Working Notes

WN1
old ration ; ½:1/3=3:2

Sacrificing ratio=3:2

WN2
Distribution of Reserve
A will get =10,000×3/5=6,000

B will get =10,000×2/5=4,000



WN3
Distribution of Premium for Goodwill
A will get =5,000×3/5=3,000

B will get =5,000×2/5=2,000

 



Page No 5.98:

Question 72:

Following is the Balance Sheet of the firm, Ashirvad, owned by A, B and C who share profits and losses of the business in the ratio of 3 : 2 : 1.

BALANCE SHEET as at 31st March, 2019

Liabilities

   `

Assets

   `

Capital A/cs:

 

Furniture

95,000

 A

1,20,000

 

Business Premises

2,05,000

 B       

 1,20,000

 

Stock-in-Trade

40,000

 C

1,20,000

3,60,000

Debtors

28,000

Sundry Creditors

 

20,000

Cash at Bank

15,000

Outstanding Salaries and wages

 

7,200

Cash in Hand

4,200

 

 

 

 

 

 

 

 

 

 

 

 

3,87,200

 

3,87,200

 

 

 

 

 


On 1st April, 2019, they admit D as a partner on the following conditions:
(a) D will bring in  
 ` 1,20,000 as his capital and also    ` 30,000 as goodwill premium for a quarter of the share in the future profits/losses of the firm.
(b) Values of the fixed assets of the firm will be increased by 10% before the admission of D.
(c) Mohan, an old customer whose account was written off as bad debts, has promised to pay  
 ` 3,000 in full settlement of his dues.
(d) Future profits and losses of the firm will be shared equally by all the partners.
Pass the necessary Journal entries and prepare Revaluation Account, Partners' Capital Accounts and opening Balance Sheet of the new firm.



Answer:

Revaluation Account

Dr.

 

 

Cr.

Particulars

Amount

 `

Particulars

Amount

 `

 

 

Fixed Assets:

 

 

 

Furniture

95,000 × 10%

9,500

Profit transferred to            

 

Business  Premises

2,05,000  10%

20,500

A Capital

15,000

 

 

B Capital

10,000

 

 

C Capital

5,000

 

 

 

 

 

 

 

30,000

 

30,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

 

 

Cr.

Particulars

A

B

C

D

Particulars

A

B

C

D

A’s Capital (Goodwill)

 

 

7,500

 

Balance b/d

1,20,000

1,20,000

1,20,000

 

B’s Capital (Goodwill)

 

 

2,500

 

Revaluation (Profit)

15,000

10,000

5,000

 

 

 

 

 

 

Cash

 

 

 

1,20,000

Balance c/d

1,65,000

1,40,000

1,15,000

1,20,000

Premium for Goodwill

22,500

7,500

 

 

 

 

 

 

 

C’s Capital (Goodwill)

7,500

2,500

 

 

 

1,65,000

1,40,000

1,25,000

1,20,000

 

1,65,000

1,40,000

1,25,000

1,20,000

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 1, 2019, after D’s admission

Liabilities

Amount

 `

Assets

Amount

 `

Capital A/cs:

 

Furniture (95,000 + 9,500)

1,04,500

A

1,65,000

 

Business Premises (2,05,000+20,500)

2,25,500

B

1,40,000

 

Stock-in-Trade

40,000

C

1,15,000

 

Debtors

28,000

D

1,20,000

5,40,000

Cash at Bank

15,000

Sundry Creditors

20,000

Cash in hand (4,200 + 1,50,000)

1,54,200

Outstanding salaries and wages

7,200

 

 

 

5,67,200

 

5,67,200

 

 

 

 


Working Note:

WN1 Calculation of Sacrificing Ratio

 

A

B

C

D

OLD RATION

3  :

2  :

1

 

NEW RATIO

1  : 

1  :

1 :

1

 

 

 

 

 


Sacrificing Ratio = Old Ratio − New Ratio

A= 3/6-1/4=6/24

B=2/6-1/4=2/24

C=1/6-1/4=-2/24((Gain)

 

Sacrificing Ratio =6/24 ; 2/24=3;1     


WN2 Calculation of C’s gain in goodwill
Goodwill of the firm=D’s share×4/1s

= 30,000×4/1s=1,20,000

 

C’s gain in goodwill=1,20,000×2/24=10,000



WN3 Amount of Goodwill to be distributed between A and B (Sacrificing Partners)

Premium for goodwill=30,000
A will get =30,000×3/4=22,500

B will get =30,000×1/4=7,500


WN4 Journal Entries for D’s Capital and distribution of goodwill
 

Particulars

L.F.

Debit

Amount

 `

Credit

Amount

 `

Cash A/c

Dr.

 

1,50,000

 

To D’s Capital A/c

 

 

1,20,000

To Premium for Goodwill A/c

 

 

30,000

(D brought Capital and share of Capital)

 

 

 

 

 

 

 

Premium for Goodwill

Dr.

 

30,000

 

C’s Capital A/c

Dr.

 

10,000

 

To A’s Capital A/c

 

 

30,000

To B’s Capital

 

 

10,000

(Gain goodwill distributed between A and B
in sacrificing ratio i.e. 3:1)

 

 

 

 

 

 

 



Page No 5.99:

Question 73:

Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019 their Balance Sheet was:

 

Liabilities

   `

Assets

   `

Sundry Creditors

16,000

Cash in Hand

1,200

Public Deposits

61,000

Cash at Bank

2,800

Bank Overdraft

6,000

Stock

32,000

Outstanding Liabilities

2,000

Prepaid Insurance

1,000

Capital A/cs:

 

Sundry Debtors

28,000

 

Deepika

48,000

 

Less: Provision for Doubtful Debts

 800

 

Rajshree

40,000

88,000

Plant and Machinery  

48,000

 

 

Land and Building

50,000

 

 

Furniture

10,000

 

 

 

 

 

1,73,000

 

1,73,000

 

 

 

 


On 1st April, 2019 the partners admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in  
 ` 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners, therefore, decide to calculate the goodwill on the basis of Anshu's share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at  
 ` 60,000, Stock at    ` 40,000 and the Provision for Doubtful Debts is to be maintained at    ` 4,000. Value of Land and Building has appreciated by 20%. Furniture has been depreciated by 10%.
(e) There is an additional liability of  
 ` 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of Deepika, Rajshree and Anshu.



Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

 `

Particulars

Amount

 `

Reserve for D. Debts

4,000

 

Plant and Machinery

12,000

Less: Old Reserve

800

3,200

    (60,000 – 48,000)

 

 

 

 

 

Furniture          10,000 × 10%

1,000

Stock (40,000 – 32,000)

8,000

Outstanding salary

8,000

 

 

Profit transferred to  

 

Land and Building

10,000

   Deepika Capital

10,680

    (50,000 × 20%)

 

   Rajshree Capital

7,120

 

 

 

30,000

 

30,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

Deepika

Rajshree

Anshu

Particulars

Deepika

Rajshree

Anshu

Balance c/d

58,680

47,120

32,000

Balance b/d

48,000

40,000

 

(before adjustment of Goodwill)

 

 

 

 

 

 

 

 

 

 

 

Revaluation

10,680

7,120

 

 

 

 

 

Cash

 

 

32,000

 

58,680

47,120

32,000

 

58,680

47,120

32,000

 

 

 

 

 

 

 

 

Deepika

 

 

2,220

Balance b/d

58,680

47,120

32,000

Rajshree

 

 

2,220

Anshu’s Capital (Goodwill)

2,220

2,220

 

Balance c/d

60,900

49,340

27,560

 

 

 

 

 

60,900

49,340

32,000

 

60,900

49,340

32,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2019 after Anshu’s admission

Liabilities

Amount

 `

Assets

Amount

 `

Outstanding Salaries

8,000

Cash in Hand

1,200

Sundry Creditors

16,000

Cash at Bank

28,800

Public Deposits

61,000

Stock

40,000

Outstanding Liabilities                 

2,000

Prepaid Insurance

1,000

Capital A/cs:

 

Sundry Debtors

28,800

 

Deepika

60,900

 

Less: reserve for D. Debts

4,000

24,800

Rajshree

49,340

 

Plant and Machinery

60,000

Anshu

27,560

1,37,800

Land and Building

60,000

 

 

Furniture

9,000

 

2,24,800

 

2,24,800

 

 

 

 


Working Notes

WN1: Calculation of Sacrificing Ratio

 

Deepika

Rajshree

Anshu

OLD RATION

3        :

      2 

 

NEW RATIO

5        :

     3     :

2


Sacrificing Ratio = Old Ratio − New Ratio
Deepika = 3/5-5/10=1/10

Rajshree =2/5-3/10=1/10

 

Deepika

Rajshree

Sacrificing Ratio =

1     :

1



WN2: Valuation of Goodwill
Capitalised value on the basis of Anshu’s share=32,000×10/2=1,60,000
Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000= 
 ` 1,37,800
Goodwill = Capitalised value − Actual Capital of all partners before adjustment of Goodwill
= 1,60,000 − 1,37,800
=  
 ` 22,200
Anshu’s share of Goodwill =22,200×2/10=4,440
Deepika and Rajshree each will entitle for Goodwill=4,440×1/2=2,220



Page No 5.99:

Question 74:

Atul and Amit are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 is as follows:

Liabilities

Amount

 `

Assets

Amount

 `

Capital A/cs:

 

Plant and Machinery

1,80,000

Atul

1,00,000

 

Furniture

30,000

Amit

1,00,000

2,00,000

Computer

10,000

Current A/cs:

 

 

Stock

40,000

Atul

70,000

 

Debtors

50,000

Amit

50,000

1,20,000

Bills Receivable

10,000

Creditors

 

40,000

Cash

10,000

Bills Payable

 

10,000

Bank

40,000

 

3,70,000

 

3,70,000

 

 

 

 


  Abhay is admitted as a partner for 1/4th share on 1st April, 2019 on the following terms:
(a) Abhay is to bring  
 ` 65,000 as capital after adjusting amount due to him included in creditors and his share of Goodwill.
(b)  
 ` 10,000 included in creditors is payable to Abhay which is to be transferred to his Capital Account.
(c) Furniture is to reduced by  
 ` 3,000 and Plant and Machinery is to be increased to    ` 1,98,000.
(d) Stock is overvalued by  
 ` 4,000.
(e) A Provision for Doubtful Debts is to be created @ 5%.
(f) Goodwill is to be valued at 2 years' purchase of average profit for four years. Profits of four years ended 31st March were as follows: 2018-19 −  
 ` 25,000, 2017-18 −    ` 10,000, 2016-17 −    ` 2,500, and 2015-16 −    ` 2,500.
Pass the Journal entries for the above arrangement.



Answer:

In the books of the Atul, Amit and Abhay

Journal

Date

Particulars

 

L.F.

Debit
Amount

 `

Credit
Amount

 `

2019

 

 

 

 

 

April 01

Creditors A/c

Dr.

 

10,000

 

 

  To Abhay’s Capital A/c

 

 

 

10,000

 

(Being amount due to Abhay transferred to his Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

60,000

 

 

  To Abhay’s Capital A/c

 

 

 

55,000

 

  To Premium for Goodwill A/c (WN1)

 

 

 

5,000

 

(Being Capital and goodwill paid by the new partner)

 

 

 

 

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

5,000

 

 

  To Atul’s Capital A/c

 

 

 

3,000

 

  To Amit’s Capital A/c

 

 

 

2,000

 

(Being premium for goodwill adjusted in 3:2)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

9,500

 

 

  To Furniture A/c

 

 

 

3,000

 

  To Stock A/c

 

 

 

4,000

 

  To Provision for Doubtful Debts A/c

 

 

 

2,500

 

(Being assets revalued and liabilities reassessed)

 

 

 

 

 

 

 

 

 

 

 

Plant & Machinery A/c

Dr.

 

18,000

 

 

  To Revaluation A/c

 

 

 

18,000

 

(Being appreciation in plant & machinery provided for)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c (WN2)

Dr.

 

8,500

 

 

  To Atul’s Capital A/c

 

 

 

5,100

 

  To Amit’s Capital A/c

 

 

 

3,400

 

(Being revaluation profit transferred to partner’s capital A/c)

 

 

 

 

 

 

 

 

 

 


Working Notes:

1. Calculation of Goodwill brought in by Abhay:

Average Profits

=

(Normal profits from 31st March, 2016 to 31st March, 2019)/2

 

=

   ` (25,000 + 10,000 + 2,500 + 2,500)/4=    ` 10,000

Goodwill

=

Average Profits × No. of years of Purchase

 

=

   `(10,000 × 2) =    ` 20,000

Goodwill brought in by Abhay

=

   `(20,000 × 1/4) =    ` 5,000


2. Calculation of Revaluation Profit/Loss:
Debit side total =  
 ` (3,000 + 4,000 + 2,500) =    ` 9,500 Credit side total=    ` 18,000 Gain on Revaluation =    ` (18,000 – 9,500) =    ` 8,500

 



Page No 5.100:

Question 75:

Yogesh and Naresh are partners sharing profits in the ratio of 3 : 2. They admit Ramesh for 1/3rd share on 1st April, 2019 and also decide to share future profits equally. Balance Sheet of the firm as at 31st March, 2019 was as follows:

Liabilities

Amount  `

Assets

Amount  `

Capital A/cs:

 

Land

4,00,000

Yogesh

5,00,000

 

Building

 

4,00,000

Naresh

5,00,000

10,00,000

Furniture

50,000

Current A/cs:

 

Computers

 

1,00,000

Yogesh

1,10,000

 

Stock

1,50,000

Naresh

90,000

2,00,000

Sundry Debtors

2,10,000

 

Employees' Provident Fund

 

25,000

Less: Provision for Doubtful Debts

10,000

2,00,000

Workmen Compensation Reserve

 

1,00,000

Cash

 

10,000

Sundry Creditors

 

75,000

Bank

 

70,000

Expenses Payable

 

10,000

Advertisement Suspense

30,000

 

14,10,000

 

14,10,000

 

 

 

 


They admitted Ramesh on the following terms:
(a) He will bring  
 ` 5,00,000 as his capital.
(b) His share of goodwill is valued at  
 ` 1,00,000 but he is unable to bring cash for his share of goodwill. It is agreed to debit the amount to his Current Account.
(c) Value of Land and Building is to be appreciated by  
 ` 40,000 each.
(d) Value of Furniture to be reduced to  
 ` 40,000.
(e) Provision for Doubtful Debts to be increased to 10%.
(f) A liability for damages of  
 ` 10,000 is to be created.
Pass the Journal entries on admission of Ramesh and prepare Revaluation Account.



Answer:

In the books of the Yogesh, Naresh and Ramesh

Journal

Date

Particulars

 

L.F.

Debit
Amount

 `

Credit
Amount

 `

2019

 

 

 

 

 

April 01

Cash A/c

Dr.

 

5,00,000

 

 

  To Ramesh’s Capital A/c

 

 

 

5,00,000

 

(Being Capital brought in by the new partner)

 

 

 

 

 

 

 

 

 

 

 

Ramesh’s Current A/c

Dr.

 

1,00,000

 

 

  To Yogesh’s Current A/c (1,00,000 × 4/5)

 

 

 

80,000

 

  To Naresh’s Current  A/c (1,00,000 × 1/5)

 

 

 

20,000

 

(Being premium for goodwill adjusted in 4 : 1)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

31,000

 

 

  To Provision for Doubtful Debts A/c

 

 

 

11,000

 

  To Liability for damages A/c

 

 

 

10,000

 

  To Furniture A/c

 

 

 

10,000

 

(Being assets revalued and liabilities reassessed)

 

 

 

 

 

 

 

 

 

 

 

Land A/c

Dr.

 

40,000

 

 

Building A/c

Dr.

 

40,000

 

 

  To Revaluation A/c

 

 

 

80,000

 

(Being appreciation in land and building provided for)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c (WN2)

Dr.

 

49,000

 

 

  To Yogesh’s Current A/c

 

 

 

29,400

 

  To Naresh’s Current  A/c

 

 

 

19,600

 

(Being revaluation profit transferred to partner’s current A/c)

 

 

 

 

 

 

 

 

 

 

 

Workmen Compensation Reserve A/c

Dr.

 

1,00,000

 

 

  To Yogesh’s Current A/c

 

 

 

60,000

 

  To Naresh’s Current A/c

 

 

 

40,000

 

(Being workmen compensation reserve distributed)

 

 

 

 

 

 

 

 

 

 

 

Yogesh’s Current A/c

Dr.

 

18,000

 

 

Naresh’s Current A/c

Dr.

 

12,000

 

 

  To Advertisement Suspense A/c

 

 

 

30,000

 

(Being accumulated loss written off)

 

 

 

 


Working Notes:

1. Calculation of new profit-sharing ratio:
 

Particulars

Yogesh

Gopal

Old Ratio

3/5

2/5

New Ratio

1/3

1/3

Gain/Sacrifice

(3/5 – 1/3)= 4/15 (Sacrifice)

(2/5 – 1/3)= 1/15 (Sacrifice)

Sacrificing Ratio

4:1


2. Calculation of Revaluation Profit/Loss:
Debit side total=  
 ` (11,000 + 10,000 + 10,000) =    ` 31,000
Credit side total =  
 ` 80,000

Gain on Revaluation=    ` (80,000 – 31,000) =    ` 49,000

Dr.

Revaluation A/c

Cr.

Particulars

Amount

 `

Particulars

Amount

 `

To Provision for Doubtful debt A/c

11,000

By Land A/c

40,000

To Liability for Damages A/c

10,000

By Building A/c                         

40,000

To Furniture A/c

10,000

 

 

To Profit transferred to:

 

 

 

  Yogesh’s Current A/c

29,400

 

 

 

   Naresh’s Current A/c

19,600

49,000

 

 

 

 

 

 

 

80,000

 

80,000

 

 

 

 

 


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Chapter-5: Admission Of A Partner 2020

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