Question 45 A Chapter 5 of +2- Part-

Question 45 A Chapter 5 of +2-Part-1

45 A. (HOTS/MEMORANDUM revaluation Account) A and B are carrying on business in partnership as chemists sharing profits and losses in the ratio of 2:3 respectively. Their balance sheet as at 31st March, 2017 was as under:

Liabilities  RsAssetsRs
Sundry Creditors 24,870Cash in Hand1,420
Capital accounts   Cash at Bank23,850
A68,100 Sundry Debtors11,000
B68,1001,36,200Stock36,000
   Furniture8,800
   Building80,000
  1,61,070 1,61,070

On that date they admitted C into partnership and gave him one-third share in future profits on the following terms:
(a) Stock and furniture are to be reduced in value by 12(1/2) %.
(b) Buildings are to be appreciated by Rs. 15,000.
(c) A provision of 5% is to be created on sundry debtors for doubtful debts.
(d) C is to bring in Rs. 60,000 as his capital and Rs. 40,000 as goodwill, which sum is to remain the business.
(e) The values of assets and liabilities other than cash are not to be altered.
Draft journal entries to record the above arrangement and show the opening balance sheet of the new firm.

The solution of Question 45 A Chapter 5 of +2 Part-1: – 

Journal
DateParticulars
L.F.DebitCredit
2019     
 Bank A/cDr. 1,00,000 
 To C’s Capital A/c.  60,000
 To Premium A/c   40,000
 (Being the amount brought in by C as his capital & goodwill )   
     
 Premium A/cDr. 40,000 
 To A’s Capital A/c   16,000
 To B’s Capital A/c   24,000
 (Being goodwill transferred to old partners capital A/c in Sacrificing Ratio 2:3) )    
      
 Memorandum Revaluation A/cDr. 8,050 
 To A’s Capital A/c   3,540
 To B’s Capital A/c   5,310
 (Being profit on revaluation transferred to old partners in old profit sharing ratio)    
      
 A’s Capital A/cDr. 2,360 
 B’s Capital A/cDr. 3,540 
 C’s Capital A/cDr. 2,950 
 To Memorandum Revaluation A/c   8,050
 (Being assets revalued)    
     
MEMORANDUM Revaluation Account
ParticularsAmountParticularsAmount
To Stock A/c4,500By Buildings A/c15,000
To Furniture A/c1,100  
To Provision for doubtful debts550  
To Profit on revaluation transferred to Capital accounts   
A3,400  
B5,310  
 15,000 15,000
To Building A/c15,000By Stock A/c4,500
  By Furniture A/c1,100
  By Provision for doubtful debts550
  By Profit on revaluation transferred to Capital accounts 
  A3,400
  B5,310
  C2,950
 15,000 15,000
Balance Sheet
Liabilities
AmountAssetsAmount
Sundry Creditors 24,870Cash in Hand 1,420
Capital accounts  FurnituCash at Bank (23,800+1,00,000) 1,23,850
A85,280 Sundry Debtors 11,000
B93,870 Stock 36,000
C57,0502,36,200Furniture 8,800
   Building 80,000
  2,61,070  2,61,070

Working Notes:

CALCULATION OF NEW RATIO

Old Ratio of A&B = 2:3
Let Total profit be = 1

New Partner C’s share ==1
3
Remaining Share ==11
3
     
 =2  
 3  
A’s New Share=2x2
53
     
 =4  
 15  
B’s New Share=32
53
     
 =6  
 15  

NEW RATIO OF A: B: C
= 4 : 6 : 5
(ii) Sacrifice ratio = Old ratio –New ratio

A’s sacrifice=24
515
     
 =2  
 15  
B’s sacrifice=36
515
     
 =3  
 15  

Sacrificing ratio is same as old (2:3)

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Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

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

2 Book 1 min - Question 45 A Chapter 5 of +2 Part-1 - USHA Publication 12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firm

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