Question 73 Chapter 5 – Unimax Class 12 Part 1 – 2021

question 73 -UNIMAX

Question 73 Chapter 5 – Unimax Class 12 Part 1 – 2021

Free Accounting book Solution - Class 11 and Class 12

73. A and B are partners sharing Profits and Losses in 3 : 2. They admit C as a new partner from 1st April, 2021. A gives 1/3rd of his share while B gives 1/4th of his share. The Balance Sheet as at 31st March, 2021 is given below :

Liabilities Amount Assets Amount
A’s Capital 17,600 Goodwill 1000
B’s Capital 25,400 Land and Building 6000
Workmen compensation fund 2,000 Investments (Market value 4500) 5000
Investment Fluctuation fund 1,000 Debtors 30000
Employees Provident fund 1,000 Stock 16000
Provision for doubtful debtors 1,000 Cash 19,000
C’s loan 30,000 Advertisement Suspense a/c 1000
       
       
  78,000   78,000

Terms of C’s admission as follows :

  1. C’s loan will be converted into his capital. C brings in 60% of his share goodwill in cash.
  2. Goodwill is to be valued at 2 years’ purchase of Super Profits based on average profits of last three complete years. The profits were :
    2018-2019 Rs. 45,000
    2019-2020 Rs. 90,000
    2020-2021 Rs. 13,5000
    The normal profits are Rs. 60000. No goodwill is to appear in the books of firm. 40% of C’s share of goodwill be adjusted through a newly opened current account in his name.
  3. Land and Building was found undervalued by Rs. 10000.
  4. Stock was found overvalued by Rs. 6000.
  5. Provision for doubtful debts is to be made equal to 5% of the debtors.
  6. Claim on account of workmen compensation is Rs. 1000.
  7. Capital accounts of partners be re-adjusted on the basis of their profit sharing ratio and any excess or deficiency be adjusted in cash. (C’s Capital should be taken as base.)

You are required to prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet.

The solution of Question 73 Chapter 5 – Unimax Class 12 Part 1: –

Revaluation A/c

Particulars   Rs. Particulars   Rs.
To Stock a/c   6000 By Land and Building a/c   10,000
To Provision for bad debts a/c    500      
To Profit on revaluation          
A (3 : 2) 2100        
B 1400 3500      
           
           
    10,000     10,000

Capital Accounts

Particulars A B C Particulars A B C
To goodwill a/c 600 400 1,635 By Balance b/d 17600 25400
To advertisement suspense a/c 600 400 1,635 By Workers comp. 600 400
To Balance c/d 40000 30000 30000 By Profit on rev. 2100 1400
To Cash a/c 2600 By Cash a/c 8600
        By Invt. Fluctuation fund a/c 300 200
        By C’s loan 30000
        By Premium a/c (10800) (60%) 7200 3600
        By C’s Current a/c (7200) (40%) 4800 2400
               
  41200 33400 30000   41200 33400 30000

Balance Sheet

Liabilities   Rs. Assets Rs.
Workers comp. fund Investment   1000 Land and Building 16000
Capital Accounts     Debtors 30000
A 40000   Stock 10000
B 30000   Cash (19000 + 8600 + 10800 – 2600) 35800
C 30000 100000 Investments 4500
Provision for bad debts (1000 + 500)   1500 C’s current a/c 7200
Employees Provident fund   1000    
         
    1,03,500   1,03,500

Working Note:

(A) Calculation of new PSR :
A’s new share = 3/5 – (1/3 X 3/5) = 3/5 – 1/5 = 2/5
Old Share – Sacrifice 
B’s new share = 2/5 – (1/4 X 2/5) = 2/5 – 1/10 = 3/10
C’s share = 1/5 + 1/10 = 3/10
New PSR = 4 : 3 : 3
(B) Sacrificing Ratio :
A’s sacrifice = 1/3 X 3/5 = 3/15
B’s sacrifice = 1/4 X 2/5 = 1/10
S.R. = 2 : 1
(C) Calculation of Goodwill :
Average Profits = (45000 + 90000 + 135000)/3
Super Profits = Average profits – Normal profits
= 90000 – 60000 = Rs. 30000
Total goodwill of firm = 30000 X 2 = Rs. 60000
C’s share = 3/10 X 60000 = Rs. 18000
(D) Calculation of Capitals :
Total capital of firm = 30000 X 10/3 = Rs. 100000
A’s req. capital = 4/10 X 100000 = Rs. 40000
B’s req. capital = 3/10 X 100000 = Rs. 30000

What is Partnership – Meaning and its Types

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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