Question 70 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 70 Chapter 6 of +2-A

Question 70 Chapter 6 of +2-A

70. A B and C were partners in a firm sharing profits in the ratio of 5 : 3: 2. On 31st March 2018, their Balance Sheet was as follows:

Liabilities   Amount  Assets Amount
Creditors   11,000 Building  20,000
Reserves   6,000 Machinery 30,000
A’s Loan A/c   5,000 Stock 10,000
Capital A/cs:     Patents 11,000
25,000   Debtors 8,000
25,000   Cash  8,000
15,000      
    87,000   87,000

A died on 1st October 2018. It was agreed among his executors and the remaining partners that:
i Goodwill to be valued at 212 years’ purchase of the average profit of the previous 4 years, which were 2014-15: 13,000; 2015-16: 12,000; 2016-17: 20,000 and 2017-18: 15,000.
ii Patents be valued at 8,000; Machinery at 28,000; and Building at 25,000.
iii Profit for the year 2017-18 be taken as having accrued at the same rate as that of the previous year.
iv Interest on capital be provided @ 10% p.a.
v Half of the amount due to A to be paid immediately to the executors and the balance transferred to his Executors’ Loan Account. Prepare A’s Capital Account and A’s Executors’ Account as on 1st October 2018.

The solution of Question 70 Chapter 6 of +2-A: –

 

A’s Capital Account
Particular
Amount Particular Amount
To Bank A/c 28,450 By Balance b/d 25,000
To A’s Executors A/c 28,450 By Reserve 3,000
    By B’s Capital A/c Goodwill 11,250
      By C’s Capital A/c Goodwill   7,500
      By Profit & Loss Suspense   3,750
      By Interest on Capital WN2   1,250
      By A’s Loan A/c WN6   5,150
    56,900     56,900

 

A’s Executors Account
Particular
Amount Particular Amount
To Bank A/c 28,450 By Balance b/d 56,900
To A’s Executors A/c 28,450    
           
    56,900     56,900

 

Working Notes:

Calculation of Share in Reserve

 

  = 6,000 X 5
10
         
  = Rs 3,000    

 


Calculation of Interest on Capital

  = 25,000 X 6 X 10
100 12
             
  = Rs 1,250        

Calculation of Profit & Loss Suspense

Profit & loss Suspense = 15,000 X 5 X 6
100 12
             
  = Rs 3,750        

Calculation of Share in Revaluation Profit/Loss

Revaluation=Nil(−3,000−2,000+5,000)

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

 

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2 Book 1 min - Question 70 Chapter 6 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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