Question 53 Chapter 5 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 53 Chapter 5 of +2- Part-

Question 53 Chapter 5 of +2-Part-1

Free Accounting book Solution - Class 11 and Class 12

53. (Hidden Goodwill)David & Bimal are partners in the firm sharing profits & losses in ratio 3:2 . On 31st March , 2018 their balance sheet was as under :

Liabilities    Rs Assets   Rs
Sundry creditors   82,000 Cash    32,000
General reserve   3,000 Stock   15,000
Capital Accounts     Debtors 9,400  
David 18,000   Less reserve for doubtful debts 400 9,000
Bimal 12,000 30,000 Building   55,000
      Furniture    4,000
    1,15,000     1,15,000

They admitted Chander as a New Partner the new profit sharing ratio became 5: 3: 2 Chander introduced a capital of Rs.16,000. Chander was unable to bring any cash for Goodwill and so it was decided to value the Goodwill on the basis of his share in the profits and the capital contributed by him. The following revaluation were made at the time of Chander’s admission.
(a) Stock had been overvalued by Rs. 750 and furniture by Rs. 500.
(b) Provision for doubtful debts to be increased by Rs. 100.
(c) A creditors for Rs. 2,350 was paid off by Bimal. Privately for which he was not to be reimbursed.
Prepare the Revaluation Account.
Partner’s Capital Account and a Balance Sheet of the new firm on the date of Chander’s admission. Show your working clearly.

The solution of Question 53 Chapter 5 of +2 Part-1: –

Revaluation Account
Particulars
Amount Particulars Amount
To Stock salary A/c   750 By creditors   2,350
To Furniture A/c   500      
To Provision for doubtful debts   100      
To profit transferred to          
– David 3/5 600        
– Bimal 2/5 400 1,000      
    2,350     2,350
Partners’ Capital Account 
Particulars David Bimal  Chander Particulars David Bimal  Chander
        By Balance b/d 18,000 12,000  
        By Bank A/c     16,000
        By Chander’s current A/c (profit) 3,000 3,000  
        By Revaluation A/c 600 400  
        By General reserve 1,800 1,200  
To Balance c/d 23,400 16,600 16,000        
  23,400 16,600 16,000   23,400 16,600 16,000
Balance Sheet
Liabilities
Amount Assets Amount
Creditors   79,650 Furniture   3,500
Capital Accounts     Building   55,000
David 23,400   Chander’s current A/C   6,000
Bimal 16,600   Stock   14,250
Chander 16,000 56,000 Debtors 9,400  
      Less reserve for doubtful debts 500 8,900
      Cash   48,000
    1,35,650     1,35,650

WORKING NOTES :

(i)Calculation of Hidden Good will
Total Capital of the firm = Rs.32,000X 5 = Rs. 1,6000
Adjusted Capital of David & Bimal ( before goodwill ) & Chander’s capital

Combined Capital:    
David = 20,400
Bimal = 13,600
Chander = 16,000
  = 50,000

Value of goodwill = 80,000-50,000
= Rs. 30,000

(ii) Premium for goodwill ( chander) = 30,000X 1/5 = Rs 6,000

Journal entry for adjustment of goodwill

Chander current A/c Dr 6,000  
To David capital A/c     3,000
To Bimal’s capital A/c     3,000
David’s sacrifice = 3 5
5 10
         
  = 1    
  10    
Bimal’s sacrifice = 2 3
5 10
         
  = 1    
  10    

SACRIFICING RATIO = 1 : 1

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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

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2 Book 1 min - Question 53 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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