Page No 5.110:
Question 96:
A and B are partners
sharing profits in the ratio of 3 : 2. They admit
C as a new partner from 1st April, 2019. They have decided to share future
profits in the ratio of 4 : 3 : 3. The Balance Sheet
as at 31st March, 2019 is given below:
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Liabilities |
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Assets |
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A's Capital |
1,76,000 |
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Goodwill |
34,000 |
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B's Capital |
2,54,000 |
4,30,000 |
Land
and Building |
60,000 |
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Workmen
Compensation Reserve |
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20,000 |
Investment (Market value ` 45,000) |
50,000 |
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Investments
Fluctuation Reserve |
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10,000 |
Debtors |
1,00,000 |
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Employee's
Provident Fund |
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34,000 |
Less: Provision for
Doubtful Debts |
10,000 |
90,000 |
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C's
Loan |
3,00,000 |
Stock |
3,00,000 |
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Bank
Balance |
2,50,000 |
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Advertising
Suspense A/c |
10,000 |
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7,94,000 |
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7,94,000 |
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Terms of C's admission are as follows:
(i) C contributes proportionate capital and
60% of his share of goodwill in cash.
(ii) Goodwill is to be valued at 2 years' purchase of super profit of last
three completed years. Profits for the years ended 31st March were:
2017 − ` 4,80,000; 2018 − ‹
` 9,30,000; 2019 − ` 13,80,000.
The normal profit is ` 5,30,000 with same amount of
capital invested in similar industry.
(iii) Land and Building was found undervalued by ` 1,00,000.
(iv) Stock was found overvalued by ‹ ` 31,000.
(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors.
(vi) Claim on account of Workmen Compensation is ` 11,000.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet.
Answer:
Revaluation Account |
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Dr. |
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Cr. |
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Particulars |
Amount ` |
Particulars |
Amount ` |
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Stock |
31,000 |
Land & Building |
1,00,000 |
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Profit transferred to: |
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Provision for Doubtful Debts |
5,000 |
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A’s Capital A/c |
44,400 |
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B’s Capital A/c |
29,600 |
74,000 |
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1,05,000 |
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1,05,000 |
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Partners’ Capital Accounts |
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Dr. |
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Cr. |
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Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
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Goodwill |
20,400 |
13,600 |
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Balance b/d |
1,76,000 |
2,54,000 |
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Advertisement Suspense A/c |
6,000 |
4,000 |
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Bank A/c |
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3,06,000 |
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Balance c/d |
3,62,400 |
3,51,600 |
3,06,000 |
Premium for Goodwill A/c |
96,000 |
48,000 |
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C’s Current A/c |
64,000 |
32,000 |
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Revaluation A/c |
44,400 |
29,600 |
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IFR |
3,000 |
2,000 |
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WCR |
5,400 |
3,600 |
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3,88,800 |
3,69,200 |
3,06,000 |
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3,88,800 |
3,69,200 |
3,06,000 |
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Bank Account |
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Dr. |
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Cr. |
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Particulars |
Amount ` |
Particulars |
Amount ` |
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Balance b/d |
2,50,000 |
Balance c/d |
7,00,000 |
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C’s Capital |
3,06,000 |
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Premium for Goodwill |
1,44,000 |
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7,00,000 |
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7,00,000 |
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Balance Sheet as on 1st April, 2019 after C’s admission |
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Liabilities |
Amount ` |
Assets |
Amount ` |
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Workmen Compensation Reserve |
11,000 |
Land & Building |
1,60,000 |
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Employees Provident Fund |
34,000 |
Bank A/c |
7,00,000 |
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C ‘s Loan |
3,00,000 |
Investment |
45,000 |
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Capital |
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Stock |
2,69,000 |
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A |
3,62,400 |
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C ‘s Current A/c |
96,000 |
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B |
3,51,600 |
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Debtors |
1,00,000 |
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C |
3,06,000 |
10,20,000 |
Less : Provision for Doubtful Debts |
5,000 |
95,000 |
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13,65,000 |
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13,65,000 |
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Working Notes:
WN1: Calculation
of Sacrifice or Gain
A :B=3:2 (Old Ratio)
A :B :C=4:3 :3 (New Ratio)S
acrificing (or Gaining) Ratio = Old Ratio - New Ratio
A's share=35−410=6−410=210
B's share=25−310=4−310=110
A:B=2:1
WN:2 Calculation of Goodwill
Goodwill=Super Profit×No. of Years' Purchase
=4,00,000×2= ` 8,00,000
C's share of Goodwill=8,00,000×310= ` 2,40,000
Goodwill brought in cash = 2,40,000×60100= ` 1,44,000
Average Profit=Total Profits of past years givenNumber of Years =27,90,000/3= ` 9,30,000
Normal Profit=Capital Employed×Normal Rate of Return/100
= ` 5,30,000
Super Profit =
Average Profit-Normal Profit
=9,30,000-5,30,000=
` 4,00,000
WN:3 Calculation of C’s Capital
Combined Capital A and B's Capital for 7/10th=3,62,400 + 3,51,600 = ` 7,14,000
So, C's Capital = 7,14,000×107×310= ` 3,06,000
Page No 5.110:
Question 97:
Answer:
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Revaluation Account |
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Dr. |
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Particulars |
Amount ` |
Particulars |
Amount ` |
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To Worker compensation liabilities |
12,500 |
By Bad debts Recovered |
5,000 |
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To Stock (82,500×10/110) |
7,500 |
By Machinery |
5,000 |
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By Loss transferred to- |
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Ram=10,000×3/5=6,000 |
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Shyam=10,000×2/5=4,000 (In old Ratio: 3:2) |
10,000 |
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20,000 |
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20,000 |
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Partners’ Capital Accounts |
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Dr. |
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Cr. |
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Particulars |
Ram |
Shyam |
Mahesh |
Particulars |
Ram |
Shyam |
Mahesh |
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To Revaluation A/c |
6,000 |
4,000 |
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By Balance b/d |
1,50,000 |
1,00,000 |
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To Balance c/d |
1,59,000 |
1,31,000 |
By Premium A/c |
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25,000 |
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By General Reserve |
15,000 |
10,000 |
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1,65,000 |
1,35,000 |
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1,65,000 |
1,35,000 |
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To Balance c/d |
1,59,000 |
1,31,000 |
58,000 |
Balance b/d |
1,59,000 |
1,31,000 |
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Bank a/c |
58,000 |
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1,59,000 |
1,31,000 |
58,000 |
1,59,000 |
1,31,000 |
58,000 |
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Balance Sheet as on 1st April, 2019 |
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Liabilities |
Amount ` |
Assets |
Amount ` |
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Workmen Compensation Reserve |
12,500 |
Bank A/c |
1,13,000 |
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Employees Provident Fund |
5,500 |
(25,000+25,000+58,000+5,000) |
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Creditors |
70,000 |
machinery |
1,47,500 |
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Capital |
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Stock |
75,000 |
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Ram |
1,59,000 |
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Shyam |
1,31,000 |
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Debtors |
1,62,500 |
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Mahesh |
58,000 |
3,48,000 |
Less : Provision for Doubtful Debts |
12,500 |
1,50,000 |
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4,85,500 |
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4,85,500 |
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Working notes;
WN-1
Calculation of Old and sacrificing ratio
Old ratio of Ram and shyam= 3:2
New ratio of –
Ram=3/5
Shyam=2/5-1/5=2-1/5=1/5
Mahesh= 1/5
New ratio of Ram, shyam and Mahesh=3:1:1
Sacrificing ratio of –
Ram =3/5-3/5=3-3/5=0/5
Shyam=2/5-1/5=2-1/5=1/5
Sacrificing ratio of Ram and Shyam = 0:1
WN-2
Adjusted Capital of Ram and shyam= 1,59,000+1,31,000=2,90,000
Mahesh’s capital= 2,90,000×20/100=58,000