Advertisement

Question 65 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 65 Chapter 5 of +2-A
Question No.65 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

Advertisement

Question 65 Chapter 5 of +2-A

Advertisement

65. Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31st March, 2019. A and B share profits and losses in the ratio of 2 : 1.

Liabilities  Assets 
Bills Payable 10,000Cash in Hand  10,000
Creditors  58,000Cash at Bank40,000
Outstanding Expenses 2,000Sundry Debtors 60,000
Capital A/cs:  Stock40,000
A’s 1,80,000 Plant1,00,000
B’s1,50,0003,30,000Building1,50,000
  4,00,000 4,00,000

C is admitted as a partner on 1st April, 2019 on the following terms:
(a) C will bring 1,00,000 as his capital and 60,000 as his share of goodwill for 1/4th share in the profits.
(b) Plant is to be appreciated to 1,20,000 and the value of building is to be appreciated by 10%.
(c) Stock is found overvalued by 4,000.
(d) A provision for doubtful debts is to be created at 5% of sundry debtors.
(e) Creditors were unrecorded to the extent of 1,000.
Pass the necessary Journal entries, prepare the Revaluation Account and Partners’ Capital Accounts, and show the Balance Sheet after the admission of C

 

The solution of Question 65  Chapter 5 of +2-A: –

 

DateParticulars
L.F.DebitCredit
 Revaluation A/cDr 1,60,000 
 To C’s Capital A/c   1,00,000
 To Premium for Goodwill A/c   60,000
 (Being C brought his share of goodwill and capital in cash)    
 Premium for Goodwill A/cDr 60,000 
 To A’s Capital A/c   40,000
 To B’s Capital A/c   20,000
 (Being Premium for goodwill distributed between X, Y and Z in sacrificing ratio i.e. 3:1)    
 Plant A/cDr 20,000 
 Building A/cDr 15,000 
 To Revaluation A/c   35,000
 (Increase in value of plant and Building of transferred to Revaluation Accounts)    
 Revaluation A/cDr 8,000 
 To Stock A/c   4,000
 To Provision for Doubtful Debts A/c   3,000
 To Creditors A/c (Unrecorded)   1,000
 (Being Decrease in stock, creation of Provision for Doubtful Debt and transferred to Revaluation Account. Unrecorded Creditors recorded in the books)    
 Revaluation A/cDr 27,000 
 To A’s Capital A/c   18,000
 To B’s Capital A/c   9,000
 (Being Profit on revaluation account distributed between A and B in their old ratio)    

 

Revaluation A/c
Particular
AmountParticularAmount
Stock 4,000Plant 20,000
Provision for Doubtful Debts 3,000Building 15,000
Creditors (Unrecorded) 1,000   
Profit transferred to     
A’s Capital18,000    
B’s Capital9,00027,000   
  35,000  35,000

Advertisement-X

 

Partners’ Capital Accounts
the year ended 31st March, 2019

ParticularsABCParticularsABC
    By Balance B/d1,80,0001,50,000
    By Cash A/c1,00,000
    By Premium for Goodwill A/c40,00020,000
    By Revaluation A/c18,0009,000
To Balance c/d 2,38,000
1,79,0001,00,000    
 2,38,0001,79,0001,00,000 2,38,0001,79,0001,00,000

 

Balance Sheet
Liabilities
AmountAssetsAmount
Bills Payable 32,950Cash in Hand 10,000
Creditors 59,000Cash at Bank(40,000+ 1,60,000)2,00,000
Capital:  Stock(40,000 – 4,000)36,000
A’s2,38,000 Sundry Debtors60,000 
B’s1,79,000 Less: Provision for D. Debts3,00057,000
C’s1,00,0005,17,000Plant 1,20,000
Outstanding Expenses 2,000Building 1,65,000
  5,88,000  5,88,000

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

Advertisement-Y

 =7 
 8

 

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

Advertisement-X

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

Advertisement-Y

 =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
  

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
 =5,880X2
5
 =2,352
  

Advertisement-Y

Advertisement-X

Distribution of Profit from Revaluation Account (in old ratio)

A will get=750X2
3
 =500
  

 

B will get=750X1
3
 =250
  

 

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

Advertisement

Advertisement

error: Content is protected !!