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Question 64 Chapter 5 - Unimax Class 12 Part 1 - 2021

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Question 64 Chapter 5 - Unimax Class 12 Part 1 - 2021

64. A, B and C are partners in a firm sharing profits and losses in the ratio of 6 : 5 : 3 respectively. Their Balance Sheet on 1st January, 2021 was as follows : -

Liabilities	Amount	Assets	Amount
Sundry Creditors	9,000	Land and Building	24,000
Capital :		Furniture	3,500
A	19,000	Stock	14,000
B	16,000	Debtors	12,600
C	8,000	Cash	900
Bills Payable	3,000

	55,000		55,000

They agreed to take D into partnership and give him a share of 1/8th on the following terms :

That D should bring in Rs. 4200 as goodwill and Rs. 7000 as his capital.
That furniture be depreciated by 12%.
That stock be depreciated by 10%.
That a reserve of 5% be created for doubtful debts.
That the value of land and building be brought upto Rs. 31000.
That after making the above adjustments the capital accounts of the old partners (who continue to share in the same proportion as before ) be adjusted on the basis of the proportion of D’s capital to his share in the business i.e. actual cash to be paid off to or brought in by the old partners as the case may be.

Give Journal Entries to record the above and Balance Sheet after D’s admission.

The solution of Question 64 Chapter 5 - Unimax Class 12 Part 1: -

Journal

Particulars		Debit	Credit

Land and Building a/c	Dr.	7000
To Revaluation A/c			7000
(Being value of assets increased)

Revaluation a/c	Dr.	2450
To Provision for doubtful debts a/c			630
To Furniture a/c			420
To Stock a/c			1400
(Being value of asset decreased & liabilities increased)

Revaluation a/c	Dr.	4550
To A’s Capital a/c			1950
To B’s Capital a/c			1625
To C’s Capital a/c			975
(Being profit on revaluation distributed among partners in old ratio)

Cash a/c		11200
To D’s Capital A/c			7000
To Premium a/c			4200
(Being capital and goodwill brought by new partners in cash)

Premium a/c	Dr.	4200
To A’s Capital A/c			1800
To B’s Capital A/c			1500
To C’s Capital A/c			900
(Being goodwill distributed among old partners in ratio)

Cash a/c	Dr.	625
To C’s Capital A/c			625
(Being capital brought by new partner)

A’s Capital a/c	Dr.	1750
B’s Capital a/c		1625
To Cash A/c			3375
(Being excess of received capital withdrawn by old partners)

Revaluation A/c

Particulars		Rs.	Particulars	Rs.
To Provision for bad debts a/c		630	By Land and Building a/c	7000
To Furniture a/c		420
To Stock a/c		1400
To Profit on revaluation
A (6 : 5 : 3)	1950
B	1625
C	975	4550

		7000		7000

Capital Accounts

Particulars	A	B	C	D	Particulars	A	B	C	D
To Balance c/d	21000	17500	10500	7000	By Balance b/d	19000	16000	8000	-
To Cash a/c	1750	1625	-	-	By Cash a/c	-	-	-	7,000
					By Cash a/c	-	-	625	-
					By Premium A/c	1800	1500	900	-
					By Profit on rev.	1950	1625	975	-


	22750	19125	10500	7000		22750	19125	10500	7000

Balance Sheet

Liabilities		Rs.	Assets		Rs.
Bills Payable		3000	Land and Building		31000
Capital Accounts			Debtors	12600
A	21000		Less : Provision	630	11970
B	19500		Cash (900 + 4200 + 7000 + 625 – 1750 – 1625)		9350
C	10500		Furniture		3080
D	7000	56000	Stock		12600
Suresh		9000

		68000			68000

Working Note:

(A) Calculation of New PSR :

Let Total Profit = 1

D’s share = 1/8

Remaining Share = 7/8
A’s new share = 6/14 X 7/8 = 6/16
B’s new share = 5/14 X 7/8 = 5/16
C’s new share = 3/14 X 7/8 = 3/16
New PSR = 6 : 5 : 3 : 2 (New PSR)
(B) Calculation of Capitals of Partners :
Total Capital of firm = 7000 X 8/1 = Rs. 56000
(i) A’s req. capital = 6/16 X 56000 = Rs. 21000
A’s actual capital = Rs. 22750
A will withdraw Rs. 1750
(ii) B’s req. Capital = 5/16 X 56000 = Rs. 17500
B’s actual capital = Rs. 19125
B will withdraw Rs. 1625
(iii) C’s req. capital = 3/16 X 56000 = Rs. 10500
(C) Sacrificing Ratio will be 6 : 5 : 3 in case if nothing is mentioned in question except new partner’s share, it is assumed.
C’s actual capital = Rs. 9875
C will introduce = Rs. 625
(iv) D’s capital = 2/16 X 56000 = Rs. 7000