Question 56 Chapter 6 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 56 Chapter 6 of +2- Part

Question 56 Chapter 6 of +2-Part-1

Free Accounting book Solution - Class 11 and Class 12

56. (Journal Entries/Amount due to executors of deceased Partner) Following is the balance sheet of Black, Brown, and White as of 31st December 2018

Liabilities  Rs. Assets  Rs. 
Capital A/c    Plant & Machinery  10,000
Black  10,000 Stock 4,000
Brown  5,000 Sundry Debtors 6,000
White  5,000 Cash in hand  200
Sundry Creditors  2,000 Cash at bank 5,000
Reserve fund  3,200    
       
  25,200   25,200

White died on 31st March 2019. Under the terms of the partnership deed, the Executors of a deceased partner wore entitled:

  1. the amount standing to the credit of the partner’s capital account,
  2. share of goodwill on the basis of twice the average of the past three year’s profit; and
  3. share of profit from the closing of the last financial year to the death on the basis of the last years profits.
    Profits for 2016, 2017, and 2018 were respectively. Rs. 6,000, Rs. 8,000 and Rs. 7,000.Profits were shared in the ratio of capitals.
    Pass the necessary journal entries and show the amount due to the executors of White.

The solution of Question 56 Chapter 6 of +2 Part-1: –

Journal
Date   Particulars
L.F. Debit Credit
a) Reserve fund A/c Dr.   3,200  
  To Black’s capital A/c       1,600
  To Brown’s capital A/c       800
  To White’s capital A/c       800
  (Being reserve fund transferred to the capital A/c in old profit sharing ratio )        
           
b) Black’s capital A/c Dr.   1,167  
  Brown’s capital A/c Dr.   2,333  
  To White’s capital A/c       3,500
  (Being goodwill A/c raised with the share of deceased partner )        
           
c) Profit & loss suspense A/c Dr.   438  
  To White’s capital A/c       438
  (Being white’s share of profit to the date of death )        
           
d) White’s capital A/c Dr.   9,738  
  To Executor’s of White loan A/c       9,738
  (Being amount due to white transferred to executors A/c )        
         
White’s Capital A/c
Particulars
Amount Particulars Amount
To executor’s loan A/c   9,738 By balance b/d   5,000
      By reserve fund   800
      By goodwill A/c   3,500
      By profit & loss A/c   438
    9,738     9,738

WORKING NOTES :

Valuation of goodwill

Year Profit
2016 6,000
2017 8,000
2018 7,000
Total 21,000
Average profit = 21,000
3
     
  = 7,000

Value of goodwill at 2 year’s purchase = 2 X 7,000 = Rs. 14,000

White’s share in goodwill = 1 x 14,000
3
         
  = Rs 3,500    

Calculation of share of profit of white till date of death
Profit average = Rs. 7,000

Profit for 3 months = 3 x 7,000
12
         
  = Rs 1,750    
White’s share of profit = 1 x 1,750
4
         
  = Rs 438    

Comment if you have any questions.

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 56 Chapter 6 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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