Question 54 Chapter 5 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 54 Chapter 5 of +2- Part-

Question 54 Chapter 5 of +2-Part-1

Free Accounting book Solution - Class 11 and Class 12

54. ( Investment taken over by old partner ) A & B are sharing profits in the ratio of 5:30 admit C as a partner with 1/3 share in profits. He has to contribute Rs. 25,000 as his capital. The balance sheet of A & B before admission was as follows.

Liabilities    Rs Assets   Rs
Creditors   21,000 Goodwill   10,000
Bills Payable   6,000 Land & Building    25,000
Capital Account     Plant & Machinery   30,000
A 50,000   Stock   15,000
B 35,000 85,000 Sundry Debtors 20,000  
General Reserve   16,000 Less Provision for Bad Debts 1,500 18,500
      Investments    20,000
      Cash    9,500
    1,28,000     1,28,000

Other terms agreed upon were :
(i) Goodwill of the firm to be valued at Rs. 21,000.
(ii) Land and buildings were to be valued at Rs. 35,000 and plant and machinery at Rs. 25,000.
(iii) The provision for bad debts was found to be in excess by Rs. 400.
(iv) A liability for Rs. 1,000 included in sundry creditors was not likely to arise.
(v)Rs. 12,000 of the investments are to be taken over by A and B in their profit sharing ratios.
(vi) B is to withdraw Rs. 3,400 in cash
Give journal entries to record the above transactions and show the balance sheet of the firm after C’s admission

The solution of Question 54 Chapter 5 of +2 Part-1: –

Journal
Date Particulars
L.F. Debit Credit
           
1 Cash A/c Dr.   25,000  
  To C’s Capital A/c       25,000
  (Being the cash brought in as capital & goodwill )      
         
2 C’s Capital A/c Dr.   7,000  
  To A’s Capital A/c       4,375
  To B’s Capital A/c       2,625
  (Being goodwill adjusted in capital A/c of partners)        
           
3 Land & Building A/c Dr.   10,000  
  Provisional for doubtful debts A/c) Dr.   400  
  Sundry Debtors A/c Dr.   1,000  
  To Revaluation A/c       11,400
  (Being revaluation of assets)        
           
4 Revaluation A/c Dr.   5,000  
  To Plant & Machinery A/c       5,000
  (Being assets revalued )        
           
5 Revaluation A/c Dr.   6,400  
  To A’s Capital A/c       4,000
  To B’s Capital A/c       2,400
  (Being profit on revaluation distributed )        
           
6 B’s Capital A/c Dr.   3,400  
  To Cash A/c       3,400
  (Being drawings of B)        
           
7 General reserve A/c Dr.   16,000  
  To A’s Capital A/c       10,000
  To B’s Capital A/c       6,000
  (Being GENERAL RESERVE distributed )        
           
8 A’s Capital A/c Dr.   6,250  
  B’s Capital A/c Dr.   3,750  
  To Goodwill A/c       10,000
  (Being goodwill written off)        
         
Partners’ Capital Account 
Particulars A B  C Particulars A B C
To Cash A/c   3,400   By Balance b/d 50,000 35,000  
To Investment A/c 7,500 1,500   By Bank A/c     25,000
To Goodwill A/c 6,250 3,750   By C’s Current A/c 4,375 2,625  
        By Revaluation A/c 4,000 2,400  
        By General reserve 10,000 6,000  
To Balance c/d 54,625 34,375 25,000        
  68,375 46,025 25,000   68,375 46,025 25,000
Balance Sheet
Liabilities
Amount Assets Amount
Creditors   21,000 Land & Building   35,000
Bills Payable   6,000 Plant & Machinery   25,000
Capital Account     Stock   15,000
A 54,625   Sundry Debtors 20,000  

B

34,375   Less Provision for Bad Debts 1,100 18,900
C 25,000 1,14,000 Investments   8,000
      C’s current A/c   7,000
      Cash   31,000
    1,40,000     1,40,000

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 54 Chapter 5 of +2 Part-1 - USHA Publication 12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firm

One thought on “Question 54 Chapter 5 of +2 Part-1 – USHA Publication 12 Class Part – 1”

  1. Apka bohot Sara questions galt he….
    Kisi ka answer kisi aur question me diya huya he…..
    Mujhe to aap logo ka smj me hi nhi ata…..
    Is sare question me jaha mistake he usee jld se jld thik kr di Jay…
    Varna I will complaint against you….

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