Question 64 Chapter 5 – Unimax Class 12 Part 1 – 2021

question 64 - UNIMAX
question 64 - UNIMAX

Question 64 Chapter 5 – Unimax Class 12 Part 1 – 2021

64. A, B and C are partners in a firm sharing profits and losses in the ratio of 6 : 5 : 3 respectively. Their Balance Sheet on 1st January, 2021 was as follows : –

Liabilities Amount Assets Amount
Sundry Creditors 9,000 Land and Building 24,000
Capital :   Furniture 3,500
A 19,000 Stock 14,000
B 16,000 Debtors 12,600
C 8,000 Cash 900
Bills Payable 3,000    
       
  55,000   55,000

They agreed to take D into partnership and give him a share of 1/8th on the following terms :

  1. That D should bring in Rs. 4200 as goodwill and Rs. 7000 as his capital.
  2. That furniture be depreciated by 12%.
  3. That stock be depreciated by 10%.
  4. That a reserve of 5% be created for doubtful debts.
  5. That the value of land and building be brought upto Rs. 31000.
  6. That after making the above adjustments the capital accounts of the old partners (who continue to share in the same proportion as before ) be adjusted on the basis of the proportion of D’s capital to his share in the business i.e. actual cash to be paid off to or brought in by the old partners as the case may be.

Give Journal Entries to record the above and Balance Sheet after D’s admission.

The solution of Question 64 Chapter 5 – Unimax Class 12 Part 1: –

Journal

Date Particulars   L.F. Debit Credit
           
  Land and Building a/c Dr.   7000  
  To Revaluation A/c       7000
  (Being value of assets increased)        
           
  Revaluation a/c Dr.   2450  
  To Provision for doubtful debts a/c       630
  To Furniture a/c       420
  To Stock a/c       1400
  (Being value of asset decreased & liabilities increased)        
           
  Revaluation a/c Dr.   4550  
  To A’s Capital a/c       1950
  To B’s Capital a/c       1625
  To C’s Capital a/c       975
  (Being profit on revaluation distributed among partners in old ratio)        
           
  Cash a/c     11200  
  To D’s Capital A/c       7000
  To Premium a/c       4200
  (Being capital and goodwill brought by new partners in cash)        
           
  Premium a/c Dr.   4200  
  To A’s Capital A/c       1800
  To B’s Capital A/c       1500
  To C’s Capital A/c       900
  (Being goodwill distributed among old partners in ratio)        
           
  Cash a/c Dr.   625  
  To C’s Capital A/c       625
  (Being capital brought by new partner)        
           
  A’s Capital a/c Dr.   1750  
  B’s Capital a/c     1625  
  To Cash A/c       3375
  (Being excess of received capital withdrawn by old partners)        

Revaluation A/c

Particulars   Rs. Particulars   Rs.
To Provision for bad debts a/c    630 By Land and Building a/c   7000
To Furniture a/c   420      
To Stock a/c   1400      
To Profit on revaluation          
A (6 : 5 : 3) 1950        
B 1625        
C 975 4550      
           
    7000     7000

Capital Accounts

Particulars A B C D Particulars A B C D
To Balance c/d 21000 17500 10500 7000 By Balance b/d 19000 16000 8000
To Cash a/c 1750 1625 By Cash a/c  – 7,000
          By Cash a/c 625
          By Premium A/c 1800 1500 900
          By Profit on rev. 1950 1625 975
                   
                   
  22750 19125 10500 7000   22750 19125 10500 7000

Balance Sheet

Liabilities   Rs. Assets   Rs.
Bills Payable   3000 Land and Building   31000
Capital Accounts     Debtors 12600  
A 21000   Less : Provision 630 11970
B 19500   Cash (900 + 4200 + 7000 + 625 – 1750 – 1625)   9350
C 10500   Furniture   3080
D 7000 56000 Stock   12600
Suresh   9000      
           
    68000     68000

Working Note:

(A) Calculation of New PSR :

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Let Total Profit = 1

D’s share = 1/8

Remaining Share = 7/8
A’s new share = 6/14 X 7/8 = 6/16
B’s new share = 5/14 X 7/8 = 5/16
C’s new share = 3/14 X 7/8 = 3/16
New PSR = 6 : 5 : 3 : 2 (New PSR)
(B) Calculation of Capitals of Partners :
Total Capital of firm = 7000 X 8/1 = Rs. 56000
(i) A’s req. capital = 6/16 X 56000 = Rs. 21000
A’s actual capital = Rs. 22750
A will withdraw Rs. 1750
(ii) B’s req. Capital = 5/16 X 56000 = Rs. 17500
B’s actual capital = Rs. 19125
B will withdraw Rs. 1625
(iii) C’s req. capital = 3/16 X 56000 = Rs. 10500
(C) Sacrificing Ratio will be 6 : 5 : 3 in case if nothing is mentioned in question except new partner’s share, it is assumed.
C’s actual capital = Rs. 9875
C will introduce = Rs. 625
(iv) D’s capital = 2/16 X 56000 = Rs. 7000

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

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)

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

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