# Question 45 A Chapter 5 of +2 Part-1 – USHA Publication 12 Class Part – 1

Q-45 A - CH-2 - Usha +2 Book 2018 - Solution - --min

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 Rs Assets Rs Sundry Creditors 24,870 Cash in Hand 1,420 Capital accounts Cash at Bank 23,850 A 68,100 Sundry Debtors 11,000 B 68,100 1,36,200 Stock 36,000 Furniture 8,800 Building 80,000 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.

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

 Journal Date Particulars L.F. Debit Credit 2019 Bank A/c Dr. 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/c Dr. 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/c Dr. 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/c Dr. 2,360 B’s Capital A/c Dr. 3,540 C’s Capital A/c Dr. 2,950 To Memorandum Revaluation A/c 8,050 (Being assets revalued)
 MEMORANDUM Revaluation Account Particulars Amount Particulars Amount To Stock A/c 4,500 By Buildings A/c 15,000 To Furniture A/c 1,100 To Provision for doubtful debts 550 To Profit on revaluation transferred to Capital accounts A 3,400 B 5,310 15,000 15,000 To Building A/c 15,000 By Stock A/c 4,500 By Furniture A/c 1,100 By Provision for doubtful debts 550 By Profit on revaluation transferred to Capital accounts A 3,400 B 5,310 C 2,950 15,000 15,000
 Balance Sheet Liabilities Amount Assets Amount Sundry Creditors 24,870 Cash in Hand 1,420 Capital accounts FurnituCash at Bank (23,800+1,00,000) 1,23,850 A 85,280 Sundry Debtors 11,000 B 93,870 Stock 36,000 C 57,050 2,36,200 Furniture 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 = = 1 – 1 3 = 2 3
 A’s New Share = 2 x 2 5 3 = 4 15

 B’s New Share = 3 – 2 5 3 = 6 15

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

 A’s sacrifice = 2 – 4 5 15 = 2 15
 B’s sacrifice = 3 – 6 5 15 = 3 15

Sacrificing ratio is same as old (2:3)

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