Question 48 Chapter 5 of +2 Part-1 - USHA Publication 12 Class Part

Question 48 Chapter 5 of +2-Part-1

48. (Revaluation A/c/Partner‘s Cap A/c/B/S) L and M share the profits of a business in the Ratio 5:3. They admit N into partnership for ¼ share in the profits to be contributed equally by L and M. On the date of admission the balance sheet of the firm was as follows:

Liabilities	Rs	Assets	Rs
L’s Capital	30,000	Machinery	26,000
M’s Capital	20,000	Furniture	18,000
Workmen’s Compensation fund	4,000	Stock	10,000
Bank Loan	12,000	Debtors	8,000
Creditors	2,000	Bank	6,000
	68,000		68,000

Terms of M’s admission were as follows:
(i) N will bring Rs. 25,000 as his capital.
(ii) Goodwill of the firm is to be valued at 4 years purchase of the average super-profits of last 3 years. Average profits of last 3 years were at Rs. 20,000, while the normal profits that can be earned with the capital employed are Rs. 12,000. No goodwill is to be raised in the books of the firm.
(iii) Furniture is to be appreciated by Rs. 6,000 and the value of a stock to be reduced by 20%
Prepare Revaluation Account, Partners Capital Accounts, and Balance Sheet of the new firm.

The Content covered in this article:

The solution of Question 48 Chapter 5 of +2 Part-1: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

The solution of Question 48 Chapter 5 of +2 Part-1: –

Revaluation Account
Particulars		Amount	Particulars	Amount
To Stock		2,000	By Furniture	6,000
To profit on Revaluation
– L 5/8	2,500
– M 3/8	1,500	2,870
		6,000		6,000

Partners’ Capital Account
Particulars	L	M	N	Particulars	L	M	N
				By Balance b/d	30,000	20,000
				By Revaluation A/c	2,500	1,500
				By Bank A/c			25,000
				By N’s Current A/c	4,000	4,000
To Balance c/d	36,500	25,500	25,000
	36,500	25,500	25,000		36,500	25,500	25,000

Balance Sheet
Liabilities		Amount	Assets	Amount
Workmen’s Compensation fund		4,000	Machinery	26,000
Bank Loan		12,000	Furniture	24,000
Creditors		2,000	Stock	8,000
L’s Capital	36,500		Debtors	8,000
M’s Capital	25,500		N’s Current A/c	8,000
N’s Capital	25,000	87,000	Bank(6000+25000)	31,000
		1,05,000		1,05,000

Working Notes:

Goodwill :

Goodwill		Rs
Average Profits	=	12,000
Normal Profits	=	20,000
Super Profits = (Average – Normal)Profits
	=	20,000 – 12,000
	=	8,000
Goodwill	=	Super Profit X Years of Purchase
	=	8,000 x 4
	=	32,000