Question 56 Chapter 6 of +2 Part-1 - USHA Publication 12 Class Part - 1

1. the amount standing to the credit of the partner's capital account,
2. share of goodwill on the basis of twice the average of the past three year's profit; and
3. share of profit from the closing of the last financial year to the death on the basis of the last years profits.
   Profits for 2016, 2017, and 2018 were respectively. Rs. 6,000, Rs. 8,000 and Rs. 7,000.Profits were shared in the ratio of capitals.
   Pass the necessary journal entries and show the amount due to the executors of White.

The solution of Question 56 Chapter 6 of +2 Part-1: -

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Journal

Date	Particulars		L.F.	Debit	Credit
a)	Reserve fund A/c	Dr.		3,200
	To Black’s capital A/c				1,600
	To Brown’s capital A/c				800
	To White’s capital A/c				800
	(Being reserve fund transferred to the capital A/c in old profit sharing ratio )
b)	Black’s capital A/c	Dr.		2,333
	Brown’s capital A/c	Dr.		1,167
	To White’s capital A/c				3,500
	(Being goodwill A/c raised with the share of deceased partner )
c)	Profit & loss suspense A/c	Dr.		438
	To White’s capital A/c				438
	(Being white’s share of profit to the date of death )
d)	White’s capital A/c	Dr.		9,738
	To Executor’s of White loan A/c				9,738
	(Being amount due to white transferred to executors A/c )

White’s Capital A/c

Particulars		Amount	Particulars		Amount
To executor’s loan A/c		9,738	By balance b/d		5,000
			By reserve fund		800
			By goodwill A/c		3,500
			By profit & loss A/c		438
		9,738			9,738

WORKING NOTES :

Valuation of goodwill

Year	Profit
2016	6,000
2017	8,000
2018	7,000
Total	21,000

Average profit	=	21,000
		3
	=	7,000

Value of goodwill at 2 year’s purchase = 2 X 7,000 = Rs. 14,000

White’s share in goodwill	=	1	x	14,000
		3
	=	Rs 3,500

Calculation of share of profit of white till date of death
Profit of 2018 = Rs. 7,000

Profit for 3 months	=	3	x	7,000
		12
	=	Rs 1,750

White’s share of profit	=	1	x	1,750
		4
	=	Rs 438

Comment if you have any questions.