Question 60 Chapter 5 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 60 Chapter 5 of +2- Part-

Question 60 Chapter 5 of +2-Part-1

Free Accounting book Solution - Class 11 and Class 12

60. (Adjustment of Capital on basis of New Partner’s Share) A, B and C trading in partnership and sharing profits and losses in the proportion of 1/2, 1/3 and 1/6 respectively desire to keep up a working partner when their Balance Sheet stood as follows:

Liabilities    Rs. Assets  Rs.
Creditors    50,000 Cash in hand  8,000
Capital A/c     Debtors  2,52,000
A 5,70,000   Stock  2,90,000
B 3,20,000   Machinery  70,000
C 1,60,000 10,50,000 Land & Building  4,80,000
         
    11,00,000   11,00,000

They agreed to admit D into partnership and give him a share of 10 paise in the following terms
(a) That D should bring in Rs. 30,000 as goodwill and Rs. 1,28,000 as his capital.
(b) That machinery is depreciated by 12%.
(c) That stock is depreciated by 10%.
(d) That a reserve of 5% be created for doubtful debts. (That the value of land and building be brought up to Rs. 6,00,000.
(e) That after making the above adjustments the capital accounts (who continue to share in the same proportions as before) be adjusted on the of the old partners’ basis of the proportion of D’s capital to his share in the business, (i.e. actual cash to be paid off or to be brought in by old partners, as the case may be.)
(g) Prepaid salaries is Rs. 20,000.
Pass journal entries to give effect to the above and prepare the balance sheet of the firm as newly constituted. Show your work regarding the determination of the new profit sharing ratio of the partners.

The solution of Question 60 Chapter 5 of +2 Part-1: –

Revaluation account
Particulars
Amount Particulars Amount
To machinery   8,400 By Land & Building   1,20,000
To Stock   29,000 By Prepaid salaries   20,000
To provisional for doubtful debts   12,600      
           
To Profit on revaluation transferred to Capital accounts          
A 45,000        
B 30,000        
C 15,000 90,000      
    1,40,000     1,40,000
A’s capital account
Particulars
Amount Particulars Amount
To Bank Account   8,400 By Balance b/d   5,70,000
To Balance c/d   29,000 By Revaluation Account   45,000
      By Premium Account   15,000
           
    1,40,000     1,40,000
A’s capital account
Particulars
Amount Particulars Amount
To Bank Account   54,000 By Balance b/d   5,70,000
To Balance c/d   5,76,000 By Revaluation Account   45,000
      By Premium Account   15,000
           
    6,30,000     6,30,000
B’s capital account
Particulars
Amount Particulars Amount
To Balance c/d   3,84,000 By Balance b/d   3,20,000
      By Revaluation Account   30,000
      By Premium Account   6,000
      By Bank Account   24,000
    3,84,000     3,84,000
C’s capital account
Particulars
Amount Particulars Amount
To Balance c/d   1,92,000 By Balance b/d   1,60,000
      By Revaluation Account   5,000
      By Premium Account   15,000
      By Bank Account   12,000
    1,92,000     1,92,000
C’s capital account
Particulars
Amount Particulars Amount
To Balance c/d   1,28,000 By Bank Account   1,28,000
           
           
Balance Sheet
Liabilities
Amount Assets Amount
Creditors   50,000 Cash in hand   8,000
Capital Accounts     Debtors 2,52,000  
A 5,76,000   Less reserve for doubtful debts 12,600 2,39,000
B 3,84,000   Cash at bank   1,40,000
C 1,92,000 12,50,000 Prepaid salaries   20,000
D     Stock   2,61,000
      Machinery   61,000
      Land & Building   6,00,000
           
    13,00,000     13,00,000

WORKING NOTES :

1. Calculation of New profit sharing Ratio 

D’s share = 1
10
Balance profit = 1 1
10
         
  = 9    
  10    
A‘s share = 9 x 3
10 6
         
  = 9    
  20    
B‘s share = 9 x 2
10 6
         
  = 3    
  20    
B‘s share = 9 x 1
10 6
         
  = 3    
  20    

New profit sharing ratio = 9 : 6 : 3 : 2
2. The Total Capital on the basis of D’s Capital = Rs.1,28,000X 10 = Rs. 12,80,000
2. SACRIFICING RATIO

A’s capital = 12,80,000 x 9
20
         
  = 5,76,000    
B’s capital = 12,80,000 x 6
20
         
  = 3,84,000    
C’s capital = 12,80,000 x 3
20
         
  = 1,92,000    

3. Calculation of cash at bank

C’s capital account
Particulars
Amount Particulars Amount
To D’s capital A/c   1,28,000 By A’s capital Account   54,000
To Premium Account   30,000 By Balance c/d   1,40,000
To B’s capital A/c   24,000      
To C’s capital A/c   12,000      
    1,94,000     1,94,000

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 - Question 60 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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