Question 12 Chapter 4 – Unimax Class 12 Part 1 – 2021

Question 12 Chapter 4 - Unimax Class 12 Part 1 - 2021

Question 12 Chapter 4 – Unimax Class 12 Part 1

Free Accounting book Solution - Class 11 and Class 12

12. P and Q share the profits of a business in the ratio of 5 : 3. They agreed to change their profit sharing ratio to 3 : 5. On the date of change the Balance Sheet of the firm was as follows :

Liabilities   Amount Assets Amount
Creditors   1,000 Machinery 26,000
Employees’ Provident Fund   1,000 Furniture 18,000
Bank Loan   12,000 Stock 10,000
Workmen Compensation Fund   2,000 Debtors 8,000
Contingency Reserve   2,800 Bank 6,000
P’s Capital   30,000 Advertisement suspense A/c 800
Q’s Capital   20,000    
         
    68,800   68,800

There also decide that :
1. Goodwill of the firm be valued at 4 years’ purchase of Super profits. The average super profits of the last three years are Rs. 20,000, while the normal profits that can be earned with Capital employed are Rs. 12,000.
2. Furniture be appreciated by Rs. 6,000 and value of stock to be reduced by 20%. You are required to prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of reconstituted Firm. (Accumulated profits and losses are to be distributed and assets will appear at revalued figures in Balance Sheet.)

The solution of Question 12 Chapter 4 – Unimax Class 12 Part 1

  Revaluation A/c

Particulars   Rs. Particulars Rs.
To Stock   2000 By Furniture 6000
To Profit transferred        
P (4000 X 5/8) 2500      
Q (4000 X 3/8) 1500 4000    
    6000   6000

  Capital Accounts

Particulars P Q Particulars P Q
To P’s Capital A/c (Share of goodwill) 8000 By Balance b/d 30000 20000
To Advertisement suspense A/c 500 300 By Revaluation A/c (Profit) 2500 1500
To Balance c/d 43000 15000 By Q’s Capital a/c (share of goodwill) 8000
      By workmen comp. fund 1250 750
      By Reserves A/c 1750 1050
  43500 23300   43500 23300

  Balance Sheet of Reconstituted firm

Liabilities   Rs. Assets Rs.
Creditors   1000 Bank 6000
Bank Loan   12000 Debtors 8000
Employees provident fund   1000 Stock 8000
Capital Accounts     Furniture 24000
P : 43300   Machinery 26000
Q : 15000 58000    
    72000   72000

Working Note :
Calculation of Sacrifice/Gain

Old Share New Share Difference
P                 5/8 3/8 2/8 (Sacrifice)
Q                3/8 5/8 2/8 (Gain)

2. Calculation of goodwill
Super Profits = Average Profits – Normal Profits
                      = Rs. 20000 – Rs. 12000 = Rs. 8000
Goodwill = Rs. 8000 X 4 = Rs. 32000
Q will pay to P, share of goodwill
i.E (32000 X 1/4) = Rs. 8000, sacrificed by P.

 

What is Partnership – Meaning and its Types

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

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)

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication


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