Question 39 Chapter 6 of +2 Part- 1 - USHA Publication

Question 39 Chapter 6 of +2-Part- 1

39 (Goodwill not appearing in Books/Payment to Retiring Partner made in Equal Installments) C , P and S were partners sharing profit in the ratio of 2/5, 2/10 and 3/10respectively. Their balance sheet on 31st December 2018 was as follows :

Liabilities	Rs.	Assets		Rs.
Capitals		Buildings		18,000
C	16,000	Plant		14,000
P	12,000	Motor Car		4,000
S	10,000	Stock		10,000
RESERVE	5,000	Debtors	7,000
Bills payable	2,000	Less : Provision for D/D	1,000	6,000
Creditors	8,000	Cash at bank		1,000
	1,06,000			1,06,000

P retires on that date on the following terms :

1. The goodwill of the firm is to be valued at Rs. 7,000.
2. Stock and buildings are to be appreciated by 10%.
3. Plant and motor car are to be depreciated by 10%.
4. Liability for the payment of gratuity to workers Rs. 2,000 not yet recorded in the books, but the same is to be provided for.
5. Provision for bad debts is no more necessary.
6. It is decided not to maintain goodwill account in the books.
7. The amount payable to P is to be paid in three equal installments beginning from 1st January ; 2019 with interest at 10% p.a.
   You are required to prepare :
   (a) Revaluation account (b) Partner’s capital account (c) New balance sheet of C & S (d) P’s loan account

The solution of Question 39 Chapter 6 of +2 Part-1: -

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Revaluation Account

Particulars		Amount	Particulars		Amount
To pant A/c		1,400	By stock		1,000
To motor A/c		400	By land & building A/c		1,800
To provision for gratuity A/c		2,000	By Provision for D/debts		1,000
		3,800			3,800

Partners’ Capital Account

Particulars	C	P	S	Particulars	C	P	S
To P’s capital A/c	1,200		9800	By Balance b/d	16,000	12,000	10,000
To P’s loan A/c		15,600		By Revaluation A/c	2,000	1,500	1,500
				By A’s capital A/c		1,200
				By C’s capital A/c		900
To Balance c/d	16,800	-	10,600
	18,000	15,600	11,500		18,000	15,600	11,500

Balance Sheet

Liabilities		Amount	Assets		Amount
Creditors		8,000	BUILDING		19,800
Bills payable		2,000	Plant		12,600
P’s loan A/c		2,000	Motor car		3,600
Provision for gratuity		15,600	Stock		11,000
Capital A/c			Debtors		7,000
X	16,800		Bank		1,000
Z	10,600	27,400
		55,000			55,000

Dr.	P’s loan A/c						Cr.
Date	Particulars	J.F.	Amount	Date	Particulars	J.F.	Amount
1 Year				1 Year
Jan 1	To cash A/c		5,200	Jan 1	By Sale Return A/c		15,600
Dec. 31	To balance c/d		11,440	Dec. 31	By Output CGST A/c		1,040
			53,400				53,400
2 Year				2 Year
Jan 1	To cash A/c		6,240	Jan 1	By P’s capital A/c		11,440
Dec. 31	To balance c/d		5,724	Dec. 31	By interest		524
			11,964				11,964
3 Year				3 Year
Jan 1	To cash A/c		5,724	Jan 1	By Balance b/d		5,724
			5,724				5,724

TREATMENT OF GOODWILL :

Particulars		Amount
Value of the goodwill of the firm		7,000
P retires his share (3/10)		2,100
Gaining ratio of C & S is 4:3
Hence C is debited		1,200
Hence S is debited		900

Comment if you have any questions.