Page No 5.100:

Question 76:

Following is the Balance Sheet of X and Y as at 31st March, 2019 who are partners in a firm sharing profits and losses in the ratio of 3 : 2 respectively:

Liabilities		Amount `	Assets		Amount `
Creditors		45,000	Cash at Bank		15,000
General Reserve		36,000	Debtors	60,000
Capital A/cs:			Less: Provision for Doubtful Debts	2,400	57,600
X	1,80,000		Patents		44,400
Y	90,000	2,70,000	Investments		24,000
Current A/cs:			Fixed Assets		2,16,000
X	30,000		Goodwill		30,000
Y	6,000	36,000

		3,87,000			3,87,000

Z is admitted as a new partner on 1st April, 2019 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to   ` 15,000.
(c) An accrued income of   ` 4,500 does not appear in the books of the firm. It is now to be recorded.
(d) X takes over the Investments at an agreed value of   ` 18,000.
(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
(f) Z will bring in   ` 60,000 as his capital by cheque.
(g) Z is to pay an amount equal to his share in firm's goodwill valued at twice the average profit of the last three years which were   ` 90,000;   ` 78,000 and   ` 75,000 respectively.
(h) Half of the amount of goodwill is to be withdrawn by X and Y.
You are required to pass Journal entries, prepare Revaluation Account, Partners' Capital and Current Accounts and the Balance Sheet of the new firm.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `
Prov. for D. Debts	600	Accrued Income	4,500
Outstanding Rent	15,000	Loss transferred to
Investments	6,000	X’s Current A/c	10,260
		Y’s Current A/c	6,840

	21,600		21,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
				Balance b/d	1,80,000	90,000
Balance c/d	1,80,000	90,000	60,000	Bank			60,000
	1,80,000	90,000	60,000		1,80,000	90,000	60,000

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	10,260	6,840		Balance b/d	30,000	6,000
Goodwill	18,000	12,000		General Reserve	21,600	14,400
Bank	12,600	5,400		Premium for Goodwill	25,200	10,800
Investments	18,000
Balance c/d	17,940	6,960
	76,800	31,200			76,800	31,200

Balance Sheet as on 1st April, 2019
Liabilities		Amount `	Assets		Amount `
Capital A/cs:			Patents		44,400
X	1,80,000		Fixed Assets		2,16,000
Y	90,000		Accrued Income		4,500
Z	60,000	3,30,000	Cash at Bank (15,000 + 96,000 – 18,000)		93,000
Outstanding Rent		15,000	Debtors	60,000
Current A/cs:			Less: 5% Reserve for D. Debts	3,000	57,000
X	17,940
Y	6,960	24,900
Creditors		45,000
		4,14,900			4,14,900

Journal
Particulars		L.F.	Debit Amount `	Credit Amount `
Bank A/c	Dr.		96,000
To Z’s Capital				60,000
To Premium for Goodwill				36,000
(Z brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		36,000
To X’s Current A/c				25,200
To Y’s Current A/c				10,800
(Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 7:3)

X's Current A/c Dr.			12,600
Y's Current A/c Dr.			5,400
To BankA/c				18,000
(Half of goodwill withdrawn by partners)

Working Notes:

WN1 Calculation of Z's Share of Premium for Goodwill

Average Profits=90,000+78,000+75,0003= ` 81,000

Firm's Goodwil=81,000×2= ` 1,62,000

Z's share=1,62,000×29= ` 36,000

` 36,000 will be distributed between X and Y in sacrificing ratio.

WN2 Calculation of Sacrificing Ratio

Sacrificing Ratio=Old Ratio-New Ratio

X's sacrifice=3/5-4/9=7/45

Y's sacrifice=2/5-3/9=3/45

Sacrificing Ratio=7 : 3

WN3 Calculation of Share of Premium of Goodwill

X's share=36,000×710= ` 25,200

Y's share=36,000×310= ` 10,800

WN4 Distribution of Loss on Revaluation

X's share=17,100×35= ` 10,260

Y's share=17,100×25= ` 6,840

Page No 5.101:

Question 77:

X and Y are partners sharing profits equally. Their Balance Sheet as on 31st March, 2019 is given below:


Liabilities		Amount `	Assets		Amount `
Capital A/cs:			Land and Building		1,50,000
X	1,50,000		Plant and Machinery		1,00,000
Y	1,00,000	2,50,000	Furniture and Fittings		25,000
Current A/cs:			Stock		75,000
X	40,000		Debtors	75,000
Y	30,000	70,000	Less: Provision for Doubtful Debts	5,000	70,000
Creditors		1,30,000	Bills Receivable		30,000
Bills Payable		50,000	Bank		50,000

		5,00,000			5,00,000

Z is admitted as a new partner for 1/4th share under the following terms:
(a) Z is to introduce   ` 1,25,000 as capital.
(b) Goodwill of the firm was valued at nil.
(c) It is found that the creditors included a sum of   ` 7,500 which was not to be paid. But it was also found that there was a liability for Compensation to Workmen amounting to   ` 10,000.
(d) Provision for doubtful debts is to be created @ 10% on debtors.
(e) In regard to the Partners' Capital Accounts, present Fixed Capital Account Method is to be converted into Fluctuating Capital Account Method.
(f) Bills of   ` 20,000 accepted from creditors were not recorded in the books.
(g) X provides   ` 50,000 loan to the business carrying interest @ 10% p.a.
You are required to prepare Revaluation Account, Partners' Capital Accounts, Bank Account and the Balance Sheet of the new firm.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `
Reserve for D. Debts	2,500	Creditors	7,500
Liability for WCF	10,000	Loss transferred to
		X’s Current A/c	2,500
		Y’s Current A/c	2,500

	12,500		12,500

Partners’ Current Accounts
Dr.	Cr.
Particulars	X	Y	Particulars	X	Y
Revaluation A/c	2,500	2,500	Balance b/d	40,000	30,000
Balance c/d	37,500	27,500
	40,000	30,000		40,000	30,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
				Balance b/d	1,50,000	1,00,000
				Current A/c	37,500	27,500
Balance c/d	1,87,500	1,27,500	1,25,000	Bank			1,25,000
	1,87,500	1,27,500	1,25,000		1,87,500	1,27,500	1,25,000

Balance Sheet as on 1st April, 2019
Liabilities		Amount `	Assets		Amount `
Creditors (1,30,000 – 7,500 – 20,000)		1,02,500	Land and Building		1,50,000
Bills Payable (50,000 + 20,000)		70,000	Plant and Machinery		1,00,000
Capital A/cs:			Fixture and Fittings		25,000
X	1,87,500		Stock		75,000
Y	1,27,500		Bills Receivables		30,000
Z	1,25,000	4,40,000	Bank (50,000 + 1,25,000 + 50,000)		2,25,000
X's Loan		50,000	Debtors	75,000
Liability for WCF		10,000	Less: 10% Reserve for D. Debts	7,500	67,500


		6,72,500			6,72,500

Page No 5.101:

Question 78:

Answer:

Revaluation Account
			Cr.
Particulars	`	Particulars	`
To plant and machinery a/c To Furniture a/c To Provision for doubtful debts	21,000	By Stock a/c	70,000
	5,000
	8,000
To profit Gautam’s capital a/c 36,000×3/4=27,000 Yashika’s Capital a/c 36,000×1/4=9,000	36,000

	70,000		70,000

hjhjh

Partners’ Capital A/c
Particulars	Gautam	Yashika	Asma	Particulars	Gautam	Yashika	Asma
To Balance C/d	4,77,000	1,09,000	2,10,000	By Balance b/d By Cash By Premium a/c By Revaluation a/c	4,00,000 50,000 27,000	1,00,000 9,000	2,10,000
	4,77,000	1,09,000	2,10,000		4,77,000	1,09,000	2,10,000
To G’s Current a/c To Balance C/d	2,67,000 2,10,000	1,40,000	2,10,000	By Balance b/d By Y’s Current a/c	4,77,000	1,09,000 31,000	2,10,000
	4,77,000	1,40,000	2,10,000		4,77,000	1,40,000	2,10,000

hjhjh

Balance sheet as at 1sh April 2019
Liabilities	`	Assets	`
Sundry creditors bills payable Capital a/c Gautam =2,10,000 Yashika =1,40,000 Ashma=2,10,000 Gautam’s current a/c	50,000 30,000 5,60,000 2,67,000	Furniture Stock Debtors 80,000 Less: Prov. For D.D. 8,000 Cash Machinery Yashika’s Current a/c	55,000 2,10,000 72,000 3,50,000 1,89,000 31,000
	9,07,000		9,07,000

Working notes;

WN-1

Calculation of old ratio and sacrificing ratio

Old ratio Gautam : Yashika = 3:1

New ratio Gautam : Yashika : Asma= 3:2:3

Sacrificing ratio= Old ratio – New Ratio

Gautam =3/4-3/8=6-3/8=3/8

Yashika=1/4-2/8=2-2/8=0/8

Therefore sacrificing ratio of Gautam : Yashika = 3:0

WN-2

Calculation of Capital

Total Capital of the new firm on the basis of new partner

Total capital new firm = 2,10,000×8/3=5,60,000

New capital of all partners

Gautam=5,60,000×3/8=2,10,000

Yashika=5,60,000×2/8=1,40,000

Asma=5,60,000×3/8=2,10,000

Page No 5.102:

Question 79:

X and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st March, 2019 was:


Liabilities		`	Assets	`
Sundry Creditors		25,000	Cash/Bank	5,000
General Reserve		18,000	Sundry Debtors	15,000
Capital A/cs:			Stock	10,000
X	75,000		Investments	8,000
Y	62,000	1,37,000	Printer	5,000
			Fixed Assets	1,37,000



		1,80,000		1,80,000

They admit Z into partnership on the same date on the following terms:
(a) Z brings in   ` 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in   ` 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at   ` 10,000. X takes over Investments at this value.
(d) Printer is to be reduced (depreciated) by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on 31st March, 2019 is   ` 1,000.
(f) By bringing in or withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass Journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet of the firm.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019
April 1	Revaluation A/c	Dr.		14,700
	To Typewriter A/c				1,000
	To Fixed Assets A/c				13,700
	(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)

April 1	Stationery A/c	Dr.		1,000
	Investment A/c	Dr.		2,000
	To Revaluation A/c				3,000
	(Increase in stationery and investment transferred to Revaluation Account)

April 1	X’s Capital A/c	Dr.		7,800
	Y’s Capital A/c	Dr.		3,900
	To Revaluation A/c				11,700
	(Revaluation loss transferred to X and Y’s Capital Account in their old ratio)

April 1	Reserve Fund A/c	Dr.		18,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				6,000
	(Reserve Fund distributed)

April 1	Cash A/c	Dr.		55,000
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				15,000
	(Z brought capital and share of goodwill)

April 1	Premium for Goodwill A/c	Dr.		15,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				5,000
	(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)

April 1	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		2,500
	To Cash				7,500
	(Half of the Premium for Goodwill withdrawn by X and Y)

April 1	X’s Capital A/c	Dr.		10,000
	To Investments A/c				10,000
	(X took over the Investment)

April 1	Cash A/c	Dr.		4,800
	To X’s Capital A/c				4,800
	(X’ brought cash to make up deficiency in capital)

April 1	Y’s Capital A/c	Dr.		26,600
	To Cash A/c				26,600
	(Y withdrew excess capital after all adjustments)

Cash/Bank Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `
Balance b/d	5,000	X’s Capital (Goodwill)	5,000
Z’s Capital	40,000	Y’s Capital (Goodwill)	2,500
Premium for Goodwill	15,000	Y’s Capital	26,600
X’s Capital	5,800	Balance c/d	31,700
	65,800		65,800

Revaluation Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `

Typewriter (5,000 × 20%)	1,000	Investment	2,000
Fixed Assets (1,37,000 × 10%)	13,700	Stationery	1,000
		Loss transferred to
		X Capital	7,800
		Y Capital	3,900
	14,700		14,700

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	7,800	3,900		Balance b/d	75,000	62,000
Investment	10,000			Reserve Fund	12,000	6,000
Cash (withdraw of goodwill)	5,000	2,500		Cash			40,000
Balance c/d	74,200	66,600	40,000	Premium for Goodwill	10,000	5,000
	97,000	73,000	40,000		97,000	73,000	40,000
Cash		26,600		Balance b/d	74,200	66,600	40,000
Balance c/d adjusted	80,000	40,000	40,000	Cash	5,800
	80,000	66,600	40,000		80,000	66,600	40,000

Balance Sheet as on March 31, 2019 after Z’s admission
Liabilities		Amount `	Assets	Amount `
Sundry Creditors		25,000	Cash	31,700
Capital A/cs:			Sundry Debtors	15,000
X	80,000		Stock	10,000
Y	40,000		Typewriter (5,000 – 1,000)	4,000
Z	40,000	1,60,000	Fixed Assets (1,37,000 – 13,700)	1,23,300
			Stationery	1,000

		1,85,000		1,85,000

Working Notes:

WN1: Sacrificing Ratio

	X	Y
Old ratio	2 :	1
Sacrificing Ratio	2 :	1

WN2: Distribution of Revaluation Loss
revaluation loss transferred to X’s capital =11,700×2/3=7,800

revaluation loss transferred to X’s capital =11,700×1/3=3,900

WN3: Distribution of Premium for Goodwill
A will get =15,000×2/3=10,000

B will get =15,000×1/3=5,000

WN4: Adjustment of Capital
Total Capital of the firm on the basis of Z’s share =40,000×4/1=1,60,000

Total Capital of the firm	=	1,60,000
Less: Z’s Capital	=	40,000
Combined Capital of X and Y	=	1,20,000

Page No 5.102:

Question 80:

A and B are in partnership sharing profits and losses in the proportion of 2/3rd and 1/3rd respectively. Their Balance Sheet as at 31st March, 2019 was: Cash   ` 1,000; Sundry Debtors   ` 15,000; Stock   ` 22,000; Plant and Machinery   ` 4,000; Sundry Creditors   ` 2,000; Bank Overdraft   ` 15,000; A's Capital   ` 15,000; B's Capital   ` 10,000.
On 1st April, 2019 they admitted C into partnership on the following terms:
(a) C to purchase one-quarter of the goodwill for   ` 3,000 and provide   ` 10,000 as capital. C brings in necessary cash for goodwill and capital.
(b) Profits and losses are to be shared in the proportion of one-half to A, one-quarter to B and one quarter to C.
(c) Plant and Machinery is to be reduced by 10% and   ` 500 are to be provided for estimated Bad Debts. Stock is to be taken at a valuation of   ` 24,940.
(d) By bringing in or withdrawing cash the capitals of A and B are to be made proportionate to that of C on their profit-sharing basis.
Prepare necessary Ledger Accounts in the books of the firm relating to the above arrangement and submit the opening Balance Sheet of the new firm.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `
Plant and Machinery (4,000 × 10%)	400	Stock (24,940 – 22,000)	2,940
Provision for Bad Debts	500
Profit transferred to
A Capital	1,360
B Capital	680
	2,940		2,940

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			10,000
				Premium for Goodwill	2,000	1,000
Balance c/d	18,360	11,680	10,000	Revaluation	1,360	680
	18,360	11,680	10,000		18,360	11,680	10,000
Cash		1,680		Balance c/d	18,360	11,680	10,000
Balance c/d	20,000	10,000	10,000	Cash	1,640
(Adjusted)
	20,000	11,680	10,000		20,000	11,680	10,000

Balance Sheet as on April 01, 2019 after C’s admission
Liabilities		Amount `	Assets		Amount `
Sundry Creditors		2,000	Cash		13,960
Bank Overdraft		15,000	Sundry Debtors	15,000
Capital A/cs:			Less: Prov. for Bad Debts	500	14,500
A	20,000		Stock		24,940
B	10,000		Plant and Machinery		3,600
C	10,000	40,000

		57,000			57,000

Cash Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `
Balance b/d	1,000	B’s Capital	1,680
C’s Capital	10,000
Premium for Goodwill	3,000
A’s Capital	1,640	Balance c/d	13,960

	15,640		15,640