Question 100 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 100 Chapter 5 of +2-A

Question 100 Chapter 5 of +2-A

100. Following is the Balance Sheet of X and Y as at 31st March, 2019. Z is admitted as a partner on that date when the position of X and Y was:

Liabilities     Assets  
X’s Capital 10,000   Cash in Hand 9,000
Y’s Capital 8,000 18,000 Debtors 11,000
Creditors   12,000 Stock 12,000
General Reserve   16,000 Building 8,000
Workmen Compensation Reserve   4,000 Machinery 10,000
    50,000   50,000

X and Y share profits in the proportion of 3 : 2. The following terms of admission are agreed upon:
(a) Revaluation of assets: Building 18,000; Stock 16,000.
(b) The liability on Workmen Compensation Reserve is determined at 2,000. (c) Z brought in as his share of goodwill 10,000 in cash.
(d) Z was to bring in further cash as would make his capital equal to 20% of the combined capital of X and Y after above revaluation and adjustments are carried out.
(e) The further profit-sharing proportions were: X−2/5th, Y−2/5th and Z−1/5th.
Prepare new Balance Sheet of the firm and Capital Accounts of the Partners.

 

 

The solution of Question 100 Chapter 5 of +2-A: –

 

Revaluation Account
Particular
Amount Particular Amount
      Building (18,000 – 8,000) 10,000
      Stock (18,000 – 8,000) 4,000
Profit on Revaluation          
X Capita 8,400        
Y Capital 5,600 14,000      
    14,000     14,000

 

Partners’ Capital Account
Parti
culars
X Y Z

Partic
ulars

X Y Z
        By Balance B/d 10,000 8,000
        By General Reserve 9,600 6,400
        By Workmen’s Compensation Fund 16,000

        By Premium for Goodwill 10,000
        By Revaluation 8,400 5,600
To Balance c/d 39,200 20,800        
  39,200 20,800   39,200 20,800
        By Balance B/d 39,200 20,800
        By Bank A/c 12,000
To Balance c/d
39,200
20,800
12,000
       
  39,200 20,800 12,000   39,200 20,800 12,000

 

Balance Sheet
Liabilities
Amount Assets Amount
Creditors   12,000 Cash in Hand   31,000
Outstanding Workmen’s Compensation Claim   2,000 Debtors   11,000
Capital:     Stock   16,000
X 39,200   Building   18,000
Y 20,800   Machinery   10,000
Z 12,000 72,000      
           
    2,18,640     2,18,640

 

Working Note:-

Old Ratio X and Y = 3 : 1
Old Ratio X ,Y and Z = 2 : 2 : 1

Sacrificing Ratio = Old Ratio – New Ratio

x’s New Ratio = 3 2
5 5
  = 3 – 2
5
  = 1
  5

 

Y’s New Ratio = 2 2
5 5
  = 2- 2
5
  = 0
  5

Only X is sacrificing 1/5 portion of profit in favor of Z. Therefore, amount of Premium for Goodwill will be taken by X only

Calculation of Z’s Capital

Combined Capital of X and Y after all adjustments = 39,200 + 20,800
  = 60,000

 

Z’s Capital = 60,000 X 20
100
  = 12,000
   

 

Cash Account
Particular
Amount Particular Amount
Balance b/d   9,000      
Z’s Capital   12,000      
Premium for Goodwill   10,000      
           
           
      Balance c/d   31,000
    31,000     31,000

 

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

  • Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
  • Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
  • Chapter No. 3 – Goodwill: Nature and Valuation
  • Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
  • Chapter No. 5 – Admission of a Partner
  • Chapter No. 6 – Retirement/Death of a Partner
  • Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

  • Chapter No. 1 – Financial Statements of a Company
  • Chapter No. 2 – Financial Statement Analysis 
  • Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
  • Chapter No. 4 – Accounting Ratios
  • Chapter No. 5 – Cash Flow Statement

 

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2 Book 1 min - Question 100 Chapter 5 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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