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

Question 53 Chapter 5 of +2-Part-1

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

• Chapter No. 1 – Accounting Not for Profit Organisations
• Chapter No. 2 – Partnership Accounts – I (Introduction)
• Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
• Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
• Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
• Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
• Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
• Chapter No. 8 – Company Accounts (Share Capital)
• Chapter No. 9 – Company Accounts (Issue of Debentures)
• Chapter No. 10 – Company Accounts (Redemption of Debentures)

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

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis
• Chapter No. 3 –  Tools of Financial Statement Analysis- Comparative and Common Size
• Chapter No. 4 – Ratio Analysis
• Chapter No. 5 – Cash Flow Statement

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