Question 45 Chapter 5 of +2- Part-

Question 45 Chapter 5 of +2-Part-1

45. ( Average Profit Method) The balance sheet of A and B who share profits and losses in the ratio of 3:2 as at 31st March 2015 was as follows:

LiabilitiesRs.AssetsRs
A’s Capital1,00,000Goodwill20,000
B’s Capital75,000Plant45,000
Creditors70,000Furniture and fittings37,500
Provident Fund 20,000Stock57,500
  Bills receivable10,000
  Debtors55,000
  Cash and bank40,000
 2,65,000 2,65,000

C was admitted into the partnership on the following terms
(a) That the new profit sharing ratio shall be A 2/5th B 2/5th and C 1/5th
b) That C is to bring his capital of 50,000 in cash and to pay his share of Goodwill in the firm. Goodwill for this purpose is to be valued at 2 years purchase for an average of the previous 4 years profits. The profits for the previous 4 years are Rs. 25,000
Rs. 22,500 ;Rs. 25,000; Rs. 27,500.
(c) That the other assets are revalued as under-Plant Rs. 52,500 Furniture and fittings
Rs. 32.000: Stock Rs. 63,000 Debtors Rs. 50,000.
(d) That the value of assets except cash and bank shall remain unchanged
Give the necessary journal entries and the balance sheet of the reconstituted firm.

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

Journal
DateParticulars
L.F.DebitCredit
2019     
1)A’s Capital A/cDr. 12,000 
 B’s Capital A/cDr. 8,000 
 To Goodwill A/c   20,000
 (Being goodwill written off )   
     
2)Bank A/cDr. 60,000 
 To C’s Capital A/c   60,000
 (Being cash brought as capital and goodwill )    
      
3)C’s Capital A/cDr. 10,000 
 To A’s Capital A/c   10,000
 (Being goodwill transferred to A’s account )    
      
4)Revaluation A/cDr. 10,500 
 To Furniture and fittings   5,500
 To Debtors   5,000
 (Being assets revalued)    
      
5)Pant A/cDr. 7,500 
 Stock A/cDr. 5,500 
 To Revaluation A/c   13,000
 (Being assets revalued)    
      
6)Revaluation A/cDr. 2,500 
 To A’s Capital A/c   1,500
 To B’s Capital A/c   1,000
 (Being profit on revaluation distributed)    
      
7)Furniture and fittingsDr. 5,500 
 DebtorsDr. 5,000 
 To Revaluation A/c   10,500
 (Being revaluation entry reversed)    
      
8)Memorandum Revaluation A/cDr. 13,000 
 To Pant A/c.  7,500
 To goodwill A/c   5,500
 (Being goodwill written off)    
      
9)A’s Capital A/cDr. 1,000 
 B’s Capital A/cDr. 1,000 
 C’s Capital A/cDr. 500 
 To Memorandum Revaluation A/c   2,500
 (Being memorandum loss distributed)    
     
Partners’ Capital Account
ParticularsABCParticularsABC
To A’s Capital A/c10,000By Balance b/d1,00,00075,000 
To Memorandum
Revaluation A/c
1,0001,000500By Bank A/c60,000
To Goodwill A/c12,0008,000 By C’s Capital A/c
    By Revaluation A/c1,5001,000 
To Balance c/d 98,50067,00049,500    
 1,11,50076,00060,000 1,11,50076,00060,000
Balance Sheet
Liabilities
AmountAssetsAmount
A’s Capital98,500 Plant 45,000
B’s Capital67,000 Furniture and fittings 37,500
C’s Capital49,5002,15,000Stock 57,500
Creditors 70,000Bills receivable 10,000
Provident Fund 20,000Debtors 55,000
   Cash and bank
(Rs. 40,000+Rs. 60,000)
 1,00,000
  3,05,000  3,05,000

Working Notes:

Goodwill=Rs.(25,000+22,500+25,000+27,500)
4
   
 =Rs. 50,000
C’s share of goodwill ==1XRs 50,000
1
 =Rs 10,000  

(ii) Sacrifice ratio:

A’s sacrifice=32
55
     
 =1  
 5  
B’s sacrifice=22
55
     
 =0  
 5  

Whole of sacrifice has been made by A

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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 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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