Question 40 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 40 Chapter 6 of +2-A

Question 40 Chapter 6 of +2-A

40. X, Y, and Z are partners sharing profits and losses in the ratio of 3: 2: 1. The Balance Sheet of the firm as of 31st March 2019 was as follows:

Liabilities Amount Assets  Amount
Creditors    21,000 Cash at Bank  5,750
Workmen Compensation Reserve 12,000 Debtors  40,000  
Investments Fluctuation Reserve  6,000 Less: Provision for Doubtful Debts 2,000 38,000
      Stock    1,24,000
Capital A/cs:    Investment (Market Value 17,600) 15,000
X’s Capital  68,000   Patents    50,000
Y’s Capital 32,000   Goodwill   6,000
Z’s Capital  21,000 1,21,000 Advertisement Expenditure  5,250
    1,60,000     1.60.000

Z retired on 1st April 2019 on the following terms:

  1. Goodwill of the firm is to be valued at 34,800.
  2. The value of Patents is to be reduced by 20% and that of machinery to 90%.
  3. Provision for doubtful debts is to be created @ 6% on debtors.
  4. Z took over the investment at market value.
  5. Liability for Workmen Compensation to the extent of 750 is to be created.
  6. A liability of 4,000 included in creditors is not to be paid.
  7. Amount due to Z to be paid as follows: 5,067 immediately, 50% of the balance within one year, and the balance by a draft for 3 Months.

Give necessary Journal entries for the treatment of goodwill, prepare Revaluation Account, Capital Accounts, and the Balance Sheet of the new firm

The solution of Question 40 Chapter 6 of +2-A: –

Journal Entries

Date Particulars
L.F. Debit Credit
  X’s Capital A/c Dr.   3,000  
  Y’s Capital A/c Dr.   2,000  
  Z’s Capital A/c Dr.   1,000  
  To Goodwill A/c       6,000
  (Being existing goodwill transferred to Partners′ Capital Accounts in their old ratio i.e. 5:3:2)      
           
  X’s Capital A/c Dr.   3,480  
  Y’s Capital A/c Dr.   2,320  
  To Z’s Capital A/c       5,800
  (Being share of the goodwill of retiring partner credit to his capital account)      
           

 

Revaluation Account
Particular
Amount Particular Amount
To Patents A/c 2,000 By Investments A/c 2,600
To Machinery 5,000 17,600 – 15,000  
To Prov. for Doubtful Debts 400 By Creditors A/c 4,000
    By Loss transferred to  
      A’s Capital A/c 400   
      B’s Capital A/c 267  
      C’s Capital A/c 133 2,000
    7,400     7,400

 

Partners’ Capital Account
Part. X Y Z

Part.

X Y Z
To Goodwill A/c 3,000 2,000 1,000 By Balance B/d 1,00,000 60,000 50,000
To Revaluation A/c 400 267 133 By X’s Capital A/c 3,480
To Z’s Capital A/c 3,480 2,320 By Y’s Capital A/c     2,320
To Adv. Exp. A/c 2,625 1,750 875 By WCR A/c 5,625 3,750 1,875
To Investments A/c 17,600 By Inv. Flu. Reserve A/c 3,000 2,000 1,000
To Bank A/c 5,067        
To Bills Payable A/c 2,500        
To Z’s Loan A/c 2,500        
To Balance c/d 67,120 31,413        
  76,625 37,750 29,625   76,625 37,750 29,625

 

Balance Sheet
Liabilities
Amount Assets Amount
Sundry Creditors 17,000 Cash at Bank 683
Workmen Compensation Claim 750 5,750 – 5,067  
Bills Payable 2,500 Stock 30,000
    Patents 8,000
      Debtors 40,000  
Z’s Loan   2,500 Less: Prov. For D/D 2,400 37,600
Capital:     Stock 1,12,000
X’s Capital 67,120   1,24,000 – 12,000  
Y’s Capital 31,413 41,200 Machinery 45,000
    1,21,283     1,21,283

 

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 40 Chapter 6 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms