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Question 59 Chapter 6 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 59 Chapter 6 of +2- Part
Q-59 - CH-6 - Usha +2 Book 2018 - Solution

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Question 59 Chapter 6 of +2-Part-1

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59. (Journal Entries/Executor’s Ale) R, S , T were partners sharing profits and losses in the ratio of 5:3:2 respectively. On 31st December 2017 their balance sheet stood as :

Liabilities Rs.Assets Rs. 
Sundry Creditors 55,000Goodwill 5,000
Reserve fund  30,000Leasehold 1,00,000
Capital A/c Patents 30,000
R1,50,000Machinery  1,50,000
S1,25,000Stock 50,000
T75,000Debtors40,000
  Cash at bank40,000
    
 4,35,000 4,35,000

T died on 1st May 2018. It was agreed that :

  1. Goodwill valued at 2 ½ years purchase of last four years profits which were 2015- Rs. 5,000: 2015- Rs. 60,000: 2016- Rs. 80,000 and 2017- Rs. 75,000.
  2. Machinery be valued at Rs. 1,40,000 ;Patents be valued at Rs. 40,000 ; Leasehold be valued at RS. 1,25,000 on 1st May 218.
  3. For the purpose of calculating T’s share in the profits of 2018, should be taken to have served on the same sales as in 2017.
  4. A sum of Rs. 21,000 to be paid immediately to the executors of T and the balance to be paid in four equal half yearly installments together with interest at 10% per annum.
    Pass the necessary journal entries to rent the above transactions and T’s executors

The solution of Question 59 Chapter 6 of +2 Part-1: –

Journal
Date  Particulars
L.F.DebitCredit
a)R’s capital A/cDr. 12,500 
 S’s capital A/cDr. 7,500 
 T’s capital A/cDr. 5,000 
 To goodwill A/c   25,000
 (Being old goodwill written off )    
      
b)R’s capital A/cDr. 21,875 
 S’s capital A/cDr. 13,125 
 To T’s capital A/c   35,000
 (Being goodwill adjusted )    
      
c)Revaluation A/cDr. 10,000 
 To Machinery A/c   10,000
 (Being machinery revalued )    
      
d)Patents A/cDr. 10,000 
 Lease hold A/cDr. 25,000 
 To Revaluation A/c   35,000
 (Being assets revalued )    
      
e)Revaluation A/cDr. 25,000 
 To R’s capital A/c   12,500
 To S’s capital A/c   7,500
 To T’s capital A/c   5,000
 (Being profit on revaluation distributed )    
      
f)Reserve Fund A/cDr. 30,000 
 To R’s capital A/c   15,000
 To S’s capital A/c   9,000
 To T’s capital A/c   6,000
 (Being reserve distributed )    
      
 T’s capital A/cDr. 1,21,000 
 To Bank A/c   21,000
 To executors loan A/c   1,00,000
 (Being cheque paid to T’s Capital)    
     

T’s Capital A/c

Particulars
AmountParticularsAmount
To goodwill A/c 5,000By balance b/d 75,000
To bank A/c 21,000By reserve A/c 6,000
To balance c/d 1,00,000By profit & loss suspense A/c 5,000
   By revaluation A/c 5,000
   By R’s capital A/c 21,875
   By S’s capital A/c 13,125
  1,26,000  1,26,000

Working notes :

Calculation of goodwill=65000+60000+80000+75000x2.5
4
     
 =Rs 1,75,000  

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T’s share of profit for current year
Profit for 2017 ( being same for 2018 )= Rs. 75,000
Profit of frim for 4 months = 75,000 X 4/12 = Rs. 25,000
T’s share in profit = 25,000 X 2/10 = Rs. 5,000
Value of goodwill at 2 year’s purchase = 2 X 7,000 = Rs. 14,000

White’s share in goodwill=1x14,000
4
     
 =Rs 3,500  

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

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
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firm

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