Question 61 Chapter 6 of +2 Part- 1 - USHA Publication

Question 61 Chapter 6 of +2-Part- 1

61. (Revaluation A/c/Capital A/c Executor A/c/B/S) The balance sheet of A , B & C is given at 31-3-2017 :

Liabilities	Rs.	Assets	Rs.
Capital A/c		Cash at bank	17,000
A	25,000	Debtors                     30,000
B	30,000	Less : provision          2,000	28,000
C	15,000	Stock	12,000
Reserve	9,000	Equipment	15,000
Creditors	21,000	Building	50,000
Bank Loan	30,000	Goodwill	12,000
Salary due	10,000	Advertisement suspense	6,000
	1,40,000		1,40,000

C died on 31-8-17. As per the deed the goodwill is to valued two times of average profits. The profits for last three years are following for the purpose of goodwill,
2016-17 Profit Rs. 30,000 (after loss on sale of building Rs. 10,000)
2015-16 Loss Rs. 9,000
2014-15 Profit Rs. 20,000 (after profit on sale of plant Rs.3,000)
Debtors are valued Rs. 26,000 ;Stock Rs. 11,000;
Profits of C are to be calculated on the basis of average profits of last three years.
C was paid Rs. 10,000 immediately and the balance was paid after six months with 12% interest. Prepare C’s executorr's account and balance sheet as un 31-8-2017.

The solution of Question 61 Chapter 6 of +2 Part-1: -

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Revaluation A/c

Particulars		Amount	Particulars		Amount
To debtors A/c		2,000
To stock A/c		1,000
			By loss on revaluation
			A	1,000
			B	1,000
			C	1,000	3,000
		3,000			3,000

Partners’ Capital Account

Particulars	A	B	C	Particulars	A	B	C
To revaluation A/c	1,000	1,000	1,000	By Balance b/d	25000	30,000	15,000
To goodwill A/c	4,000	4,000	4,000	By Reserve A/c	3,000	3,000	3,000
To adv. Suspense A/c	2,000	2,000	2,000	By A’s capital A/c			5,333
To c’s capital A/c	5,333	5,334		By B’s capital A/c			5,334
To c’s executors A/c			23,889	By P & L suspense A/c			2,222
To Balance c/d	15,667	20,666	-
	28,000	33,000	30,889		28,000	33,000	30,889

Working Notes :

Calculation of profit to C

Years		Profit
2016-17	Profit 30,000+10,000	40,000
2015-16	Loss	(-,9000)
2014-15	Profit 20,000-3,000	17,000
		48,000

Average profit	=	48,000
		3
	=	16,000

C’s share in profit = 16,000 X (5/12) X (1/3) = 2,222

Calculation of the Goodwill

Average Profit = 16,000
Goodwill = Average profit X No. of Year’s purchase = 16000 X 3 = 32,000
C’s share = 32,000 X 1/3 = 10,667

Journal

Date	Particulars		L.F.	Debit	Credit
a)	A’s capital A/c	Dr.		5,333
	B’s capital A/c	Dr.		5,334
	To C’s capital A/c				10,667
	(Being goodwill adjusted )

C’s executors A/c

Date	Particulars		Amount	Particulars		Amount
31-8-17	To cash A/c		10,000	By C’s capital A/c		23,889
28-2-18	To stock A/c		14,722	By interest A/c		833
			24,722			24,722

Balance Sheet

Liabilities		Amount	Assets		Amount
Capital A/c			Cash at bank		7,000
A		15,667	Debtors	30,000
B		20,666	Less Provision	4,000	26,000
C’s executor		13,889	Stock		11,000
Creditors		21,000	Equipment		15,000
BANK Loan		30,000	Building		50,000
Salary due		10,000	P & L Suspense A/c		2,222
		1,11,222			1,11,222

Comment if you have any questions.