Volume-1 | Chapter-5 | Question: 96 and 97 | Admission Of A Partner | Ts grewal solution 2020-21 | Class-12th

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:

 

Liabilities

   `

Assets

   `

A's Capital

1,76,000

 

Goodwill

34,000

B's Capital

     2,54,000

 4,30,000

Land and Building

   60,000

Workmen Compensation Reserve

 

20,000

Investment

(Market value    ` 45,000)

50,000

Investments Fluctuation Reserve 

 

10,000

Debtors

1,00,000

 

Employee's Provident Fund

 

34,000

Less: Provision for Doubtful Debts

10,000

90,000

 C's Loan

3,00,000

Stock

3,00,000

 

 

Bank Balance

2,50,000

 

 

Advertising Suspense A/c

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

7,94,000

 

7,94,000

 

 

 

 


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

Dr.

 

Cr.

Particulars

Amount

 `

Particulars

Amount

 `

 

 

 

 

Stock

31,000

Land & Building

1,00,000

Profit transferred to:

 

Provision for Doubtful Debts

5,000

A’s Capital A/c

44,400

 

 

 

B’s Capital A/c

29,600

74,000

 

 

 

 

 

 

 

1,05,000

 

1,05,000

 

 

 

 

 

 

 

 

 

 

 

                    

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

Goodwill

20,400

13,600

 

Balance b/d

1,76,000

2,54,000

 

Advertisement Suspense A/c

6,000

4,000

 

Bank A/c

 

 

3,06,000

Balance c/d

3,62,400

3,51,600

3,06,000

Premium for Goodwill A/c

96,000

48,000

 

 

 

 

 

C’s Current A/c

64,000

32,000

 

 

 

 

 

Revaluation A/c

44,400

29,600

 

 

 

 

 

IFR

3,000

2,000

 

 

 

 

 

WCR

5,400

3,600

 

 

 

 

 

 

 

 

 

 

3,88,800

3,69,200

3,06,000

 

3,88,800

3,69,200

3,06,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Bank Account

 

 

Dr.

 

Cr.

 

 

Particulars

Amount

 `

Particulars

Amount

 `

 

 

Balance b/d

2,50,000

Balance c/d

7,00,000

 

 

C’s Capital

3,06,000

 

 

 

 

Premium for Goodwill

1,44,000

 

 

 

 

 

7,00,000

 

7,00,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance Sheet

as on 1st April, 2019 after C’s admission

 

 

Liabilities

Amount

 `

Assets

Amount

 `

 

 

Workmen Compensation Reserve

11,000

Land & Building

1,60,000

 

 

Employees Provident Fund

34,000

Bank A/c

7,00,000

 

 

C ‘s Loan

3,00,000

Investment

45,000

 

 

Capital

 

Stock

2,69,000

 

 

A

3,62,400

 

C ‘s Current A/c

96,000

 

 

B

3,51,600

 

Debtors

1,00,000

 

 

 

C

3,06,000

10,20,000

Less : Provision for Doubtful Debts

5,000

95,000

 

 

 

 

 

 

 

 

 

13,65,000

 

13,65,000

 

 

 

 

 

 

 

 

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:

 

Revaluation Account

 

 

Dr.

 

 

Particulars

Amount

 `

Particulars

Amount

 `

 

 

 

 

 

 

 

 

To Worker compensation liabilities

12,500

By Bad debts Recovered

5,000

 

 

To Stock (82,500×10/110)

7,500 

By Machinery

5,000

 

 

By Loss transferred to-

 

 

 

 Ram=10,000×3/5=6,000

 

 

 

 Shyam=10,000×2/5=4,000

(In old Ratio: 3:2)

10,000 

 

 

20,000

 

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Accounts

 

Dr.

 

Cr.

 

Particulars

Ram

Shyam

Mahesh

Particulars

Ram

Shyam

Mahesh

 

To Revaluation A/c

6,000

4,000

 

By Balance b/d

1,50,000

1,00,000

 

 

To Balance c/d

1,59,000

1,31,000

By Premium A/c

 

25,000 

 

By General Reserve

15,000

10,000

 

 

 

1,65,000

1,35,000

 

1,65,000

1,35,000

 

To Balance c/d

1,59,000

1,31,000

58,000

Balance b/d

1,59,000

1,31,000

 

 

Bank a/c

58,000

 

1,59,000

1,31,000

58,000

1,59,000

1,31,000

58,000

 

 

 

Balance Sheet

as on 1st April, 2019 

 

 

Liabilities

Amount

 `

Assets

Amount

 `

 

 

Workmen Compensation Reserve

12,500

Bank A/c

1,13,000

 

 

Employees Provident Fund

5,500

(25,000+25,000+58,000+5,000)

 

 

Creditors

70,000

machinery

1,47,500

 

 

Capital

 

Stock

75,000

 

 

Ram

1,59,000

 

 

 

Shyam

1,31,000

 

Debtors

1,62,500

 

 

 

Mahesh

58,000

3,48,000

Less : Provision for Doubtful Debts

12,500

1,50,000

 

 

 

 

 

 

 

 

 

4,85,500

 

4,85,500

 

 

 

 

 

 

 

 

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