Question 53 Chapter 5 of +2- Part-

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  RsAssets Rs
Sundry creditors 82,000Cash  32,000
General reserve 3,000Stock 15,000
Capital Accounts  Debtors9,400 
David18,000 Less reserve for doubtful debts4009,000
Bimal12,00030,000Building 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
AmountParticularsAmount
To Stock salary A/c 750By creditors 2,350
To Furniture A/c 500   
To Provision for doubtful debts 100   
To profit transferred to     
– David 3/5600    
– Bimal 2/54001,000   
  2,350  2,350
Partners’ Capital Account 
ParticularsDavidBimal Chander ParticularsDavidBimal Chander
    By Balance b/d18,00012,000 
    By Bank A/c  16,000
    By Chander’s current A/c (profit)3,0003,000 
    By Revaluation A/c600400 
    By General reserve1,8001,200 
To Balance c/d 23,40016,60016,000    
 23,40016,60016,000 23,40016,60016,000
Balance Sheet
Liabilities
AmountAssetsAmount
Creditors 79,650Furniture 3,500
Capital Accounts  Building 55,000
David23,400 Chander’s current A/C 6,000
Bimal16,600 Stock 14,250
Chander16,00056,000Debtors9,400 
   Less reserve for doubtful debts5008,900
   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/cDr6,000 
To David capital A/c  3,000
To Bimal’s capital A/c  3,000
David’s sacrifice=35
510
     
 =1  
 10  
Bimal’s sacrifice=23
510
     
 =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

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

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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