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Question 63 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 63 Chapter 5 of +2-A
Question No.63 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

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Question 63 Chapter 5 of +2-A

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63. A and B are carrying on business in partnership and sharing profits and losses in the ratio of  3 : 2. Their Balance Sheet as at 31st March, 2019 stood as:

Liabilities  Assets 
Creditors 11,800Cash 1,500
A’s Capital51,450 Stock28,000
B’s Capital36,75088,200Debtors 19,500
   Furniture2,500
   Machinery48,500
  1,00,000 1,00,000

They admit C into partnership on 1st April, 2019 and give him 1/8th share in future profits on the following terms:

  1. Goodwill of the firm be valued at twice the average of the last three years’ profits which amounted to 21,000; 24,000 and 25,560.
  2. C is to bring cash for the amount of his share of goodwill.
  3. C is to bring cash 15,000 as his capital.
    Pass Journal entries recording these transactions, draw out the Balance Sheet of the new firm and determine new profit-sharing ratio.

 

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The solution of Question 63 Chapter 5 of +2-A: –

 

DateParticulars
L.F.DebitCredit
 Cash A/cDr 20,880 
 To C’s Capital A/c   15,000
 To Premium for Goodwill A/c   5,880
 (Being C brought his share of goodwill and capital in cash)    
 Premium for Goodwill A/cDr 5,880 
 To X’s Capital A/c   3,528
 To Y’s Capital A/c   2,352
 (Being Premium for goodwill distributed between X, Y and Z in sacrificing ratio i.e. 3:1)    

 

Case A

ParticularsA
BCParticularsABC
    By Balance B/d51,45036,750
    By Cash A/c15,000
    By Premium for Goodwill A/c3,5282,352
To Balance c/d 54,97839,10215,000    
 54,97839,10215,000 54,97839,10215,000

 

Balance Sheet
Liabilities
AmountAssetsAmount
Creditors 11,800Cash(1,500 +20,880)22,380
   Stock 28,000
Capital:  Debtors 19,500
A’s54,978 Furniture 2,500
B’s39,102 Machinery 48,500
C’s15,0001,09,080   
  1,20,880  1,20,880

Working Note:-

Old Ratio of A and B=3 : 2
C is admitted for 1/8th share of profit  

Let the total share of the business = 1
Remaining share of A and B after C’s Admission = Total Share – C’s Share

Remaining share=11
8
 =8 – 1 
8

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 =7 
 8

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To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’

New Ratio = Combined share of A and B X Old Ratio

A’s New Ratio=7X3
85
 =21 
 40
B’s New Ratio=7X2
85
 =14 
 40
C’s New Ratio=1X5
85
 =5 
 40

New Profit sharing Ratio between A ,B and C = 21 : 14 : 5

 

Average Profit=Total Profit for past given years
Number of years

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 =21,000 + 24,000 + 25,560
3
 =70,560
3
 =23,520
Number of years’ purchase=2
Goodwill=Average Profit X Number of years’ purchase
Goodwill=23,520 X 2
Goodwill=47,040

 

C’s Share of Goodwill=Firm’s Goodwill  X Share of HinaS
 =47,040X1
8
 =5,880
  

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Sacrificing Ratio of A and B = 3 : 2

A will get Share of Goodwill=C’s Goodwill  X Sacrifice share of A
 =5,880X3
5
 =3,528
  

 

B will get Share of Goodwill=C’s Goodwill  X Sacrifice share of B

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 =5,880X2
5
 =2,352
  

 

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

  • Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
  • Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
  • Chapter No. 3 – Goodwill: Nature and Valuation
  • Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
  • Chapter No. 5 – Admission of a Partner
  • Chapter No. 6 – Retirement/Death of a Partner
  • Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

  • Chapter No. 1 – Financial Statements of a Company
  • Chapter No. 2 – Financial Statement Analysis 
  • Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
  • Chapter No. 4 – Accounting Ratios
  • Chapter No. 5 – Cash Flow Statement

 

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 Firms

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