Question 61 Chapter 6 of +2-Part- 1
61. (Revaluation A/c/Capital A/c Executor A/c/B/S) The balance sheet of A , B & C is given at 31-3-2017 :
| Liabilities | Rs. | Assets | Rs. |
| Capital A/c | Cash at bank | 17,000 | |
| A | 25,000 | Debtors 30,000 | |
| B | 30,000 | Less : provision 2,000 | 28,000 |
| C | 15,000 | Stock | 12,000 |
| Reserve | 9,000 | Equipment | 15,000 |
| Creditors | 21,000 | Building | 50,000 |
| Bank Loan | 30,000 | Goodwill | 12,000 |
| Salary due | 10,000 | Advertisement suspense | 6,000 |
| 1,40,000 | 1,40,000 |
C died on 31-8-17. As per the deed the goodwill is to valued two times of average profits. The profits for last three years are following for the purpose of goodwill,
2016-17 Profit Rs. 30,000 (after loss on sale of building Rs. 10,000)
2015-16 Loss Rs. 9,000
2014-15 Profit Rs. 20,000 (after profit on sale of plant Rs.3,000)
Debtors are valued Rs. 26,000 ;Stock Rs. 11,000;
Profits of C are to be calculated on the basis of average profits of last three years.
C was paid Rs. 10,000 immediately and the balance was paid after six months with 12% interest. Prepare C’s executorr’s account and balance sheet as un 31-8-2017.
The solution of Question 61 Chapter 6 of +2 Part-1: –
| Revaluation A/c |
|||||
| Particulars |
Amount | Particulars | Amount | ||
| To debtors A/c | 2,000 | ||||
| To stock A/c | 1,000 | ||||
| By loss on revaluation | |||||
| A | 1,000 | ||||
| B | 1,000 | ||||
| C | 1,000 | 3,000 | |||
| 3,000 | 3,000 | ||||
| Partners’ Capital Account | |||||||
| Particulars | A | B | C | Particulars | A | B | C |
| To revaluation A/c | 1,000 | 1,000 | 1,000 | By Balance b/d | 25000 | 30,000 | 15,000 |
| To goodwill A/c | 4,000 | 4,000 | 4,000 | By Reserve A/c | 3,000 | 3,000 | 3,000 |
| To adv. Suspense A/c | 2,000 | 2,000 | 2,000 | By A’s capital A/c | 5,333 | ||
| To c’s capital A/c | 5,333 | 5,334 | By B’s capital A/c | 5,334 | |||
| To c’s executors A/c | 23,889 | By P & L suspense A/c | 2,222 | ||||
| To Balance c/d | 15,667 | 20,666 | – | ||||
| 28,000 | 33,000 | 30,889 | 28,000 | 33,000 | 30,889 | ||
Working Notes :
Calculation of profit to C
| Years | Profit | |
| 2016-17 | Profit 30,000+10,000 | 40,000 |
| 2015-16 | Loss | (-,9000) |
| 2014-15 | Profit 20,000-3,000 | 17,000 |
| 48,000 |
| Average profit | = | 48,000 |
| 3 | ||
| = | 16,000 |
C’s share in profit = 16,000 X (5/12) X (1/3) = 2,222
Calculation of the Goodwill
Average Profit = 16,000
Goodwill = Average profit X No. of Year’s purchase = 16000 X 3 = 32,000
C’s share = 32,000 X 1/3 = 10,667
| Journal |
|||||
| Date | Particulars |
L.F. | Debit | Credit | |
| a) | A’s capital A/c | Dr. | 5,333 | ||
| B’s capital A/c | Dr. | 5,334 | |||
| To C’s capital A/c | 10,667 | ||||
| (Being goodwill adjusted ) | |||||
| C’s executors A/c |
||||||
| Date | Particulars |
Amount | Particulars | Amount | ||
| 31-8-17 | To cash A/c | 10,000 | By C’s capital A/c | 23,889 | ||
| 28-2-18 | To stock A/c | 14,722 | By interest A/c | 833 | ||
| 24,722 | 24,722 | |||||
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Capital A/c | Cash at bank | 7,000 | |||
| A | 15,667 | Debtors | 30,000 | ||
| B | 20,666 | Less Provision | 4,000 | 26,000 | |
| C’s executor | 13,889 | Stock | 11,000 | ||
| Creditors | 21,000 | Equipment | 15,000 | ||
| BANK Loan | 30,000 | Building | 50,000 | ||
| Salary due | 10,000 | P & L Suspense A/c | 2,222 | ||
| 1,11,222 | 1,11,222 | ||||
Comment if you have any questions.
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End of Solution
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Question 61 Chapter 6 of +2 Part- 1 – USHA Publication
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Chapter No. 1 – Accounting Not-for-Profit Organisations (Deleted from the Syllabus)
Chapter No. 2 – Partnership Accounts – I (Introduction)
Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
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Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
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- Chapter No. 4 – Partnership Accounts – III (Change in Profit Sharing Ratio among Existing Partners)
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