Question 28 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 28 Chapter 5 of +2-A

Question 28 Chapter 5 of +2-A

28. Anshul and Parul are partners sharing profits in the ratio of 3 : 2. They admit Payal as partner for 1/4th share in profits on 1st April, 2019. Payal brings 5,00,000 as capital and her share of goodwill by cheque. It was agreed to value goodwill at three years’ purchase of average profit of last four years. Profits for the last four years ended 31st March,

2015-16 4,00,000
2016-17 5,00,000
2017-18 6,00,000
2018-19 7,00,000

 

Additional Information:

  1. Closing Stock for the year ended 31st March, 2018 was overvalued by 50,000.
  2. 1,00,000 should be charged annually to cover management cost. Pass necessary Journal entries on Payal’s admission.

 

 

The solution of Question 28 Chapter 6 of +2-A

Date Particulars
L.F. Debit Credit
  Bank A/c Dr   8,37,500  
  To Payal’s Capital A/c       5,00,000
  To Premium for Goodwill A/c       3,37,500
  (Being C brought his share of goodwill)        
  Premium for Goodwill A/c Dr   3,37,500  
  To Anshul’s Capital A/c       2,02,500
  To X’s Capital A/c       1,35,000
  (Being goodwill distributed among the old partners’ in their sacrificing ratio)        

 

Particulars /
Year Ended
31st
March, 2016
31st
March, 2017
31st
March, 2018
31st
March, 2019
Profit/(Loss) 4,00,000 5,00,000 6,00,000 7,00,000
Less: Overvaluation of Closing Stock     – 50,000  
Add: Overvaluation of Opening Stock       50,000
Less: Annual Charge for Management Cost – 1,00,000 -1,00,000 -1,00,000 -1,00,000
Adjusted Profits/(Loss) 3,00,000 4,00,000 4,50,000 6,50,000

 

Average Profit = Total Profit for past given years
Number of years
Average Profit = 3,00,000+4,00,000+4,50,000+6,50,000
4
Average Profit = 18,00,000
4
  = 4,50,000

 

Number of years’ purchase =
Goodwill = Average Profit X Number of years’ purchase
Goodwill = 4,50,000 X 3
Goodwill = 13,50,000

 

Old Ratio of Anshul and Parul = 3 : 1
New Ratio of Anshul, Parul and Payal = 1 : 1 : 1

Sacrificing Share = Old Ratio – New Ratio

Anshul’s Sacrificing Share = 3 1
4 3
  = 9 – 4
12
  = 5 Sacrifice
  12

 

Y’s Sacrificing Share = 1 1
4 3
  = 3 – 4
12
  = (-1) Gains
  12

 

Total Firm’s Goodwill = 13,50,000
Payal’s share of Goodwill = 13,50,000 X 1
4
  = 3,37,500
   


Distribution of Payal’s share of Goodwill
Share of Goodwill = Payal’s Goodwill  X Partners’ Sacrifice share

Anshul’s Share of Goodwill = 3,37,500 X 3
5
  = 2,02,500
   

 

Parul’s Share of Goodwill = 3,37,500 X 2
5
  = 1,35,000
   

 

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

 

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

2 Book 1 min - Question 28 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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