Advertisement

Question 76 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 76 Chapter 6 of +2-A
Question No.76 Chapter No.6 - T.S. Grewal +2 Book 2019-Solution

Advertisement

Question 76 Chapter 6 of +2-A

Advertisement

76. R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2018, their Balance Sheet stood as:

Liabilities Amount AssetsAmount
Sundry Creditors 40,000Goodwill25,000
Bills Payable 15,000Leasehold1,00,000
Workmen Compensation Reserve 30,000Patents30,000
Capital A/cs:  Machinery1,50,000
R1,50,000 Stock50,000
S1,25,000 Debtors40,000
T75,0003,50,000Cash at Bank40,000
  4,35,000 4,35,000

T died on 1st August 2018. It was agreed that:
a Goodwill be valued at 212 years’ purchase of average of last 4 years’ profits which were: 2014-15: 65,000; 2015-16: 60,000; 2016-17: 80,000 and 2017-18: 75,000.
b Machinery be valued at 1,40,000; Patents be valued at 40,000; Leasehold be valued at 1,25,000 on 1st August, 2018.
c For the purpose of calculating T’s share in the profits of 2018-19, the profits in 2018-19 should be taken to have accrued on the same scale as in 2017-18.
d A sum of 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T’s Executors’ Account.

 

The solution of Question 76 Chapter 6 of +2-A: –

 

DateParticulars
L.F.DebitCredit
 Revaluation A/cDr. 75,000 
 To Machinery A/c   75,000
 (Being Decrease in value of Machinery transferred to Revaluation Account)   
 Patents A/cDr. 10,000 
 Leasehold A/cDr. 25,000 
 To Revaluation A/c   35,000
 (Being Increase in value Patents and Leasehold transferred to Revaluation Account)    
 Revaluation A/cDr. 25,000 
 To R’s Capital A/c   12,500
 To S’s Capital A/c   7,500
 To T’s Capital A/c   5,000
 (Being Revaluation profit distributed among partners in their old ratio)    
 R’ Capital A/cDr. 12,500 
 S’s Capital A/cDr, 7,500 
 T’s Capital A/cDr. 5,000 
 To Goodwill A/c   25,000
 (Being Goodwill written off among partners in their old ratio)    
 R’s Capital A/cDr. 21,875 
 S’s Capital A/cDr. 13,125 
 To T’s Capital A/c   35,000
 (Being T’s share of goodwill adjusted)    
 Profit and Loss Suspense A/cDr. 5,000 
 To T’s Capital A/c   5,000
 (Being T’s share of profit transferred to his capital account)    
 Workmen’s Compensation Reserve A/cDr. 30,000 
 To R’s Capital A/c   15,000
 To S’s Capital A/c   9,000
 To T’s Capital A/c   6,000
 (Being Workmen’s Compensation Reserve distributed among partners in their old ratio)    
 T’s Capital A/cDr. 1,21,000 
 To T’s Executors A/c   1,21,000
 (Being Amount due to T after all adjustments transferred to his Executor’s Account)    
 T’s Executor’s A/cDr. 21,000 
 To Bank A/c   21,000
 (Being Amount due to T after all adjustments transferred to his Executor’s Account)    

Advertisement-X

 

 

T’s Executor’s Account
DateParticularAmountDateParticularAmount
2018     
Aug. 01To Cash A/c21,000Aug. 01By T’s Capital A/c1,21,000
2019     
Jan. 31To Cash A/c 25,000 + 5,00030,000Aug. 01By Interest 1,00,000 ×10% for 6 months 5,000
Mar. 31To Balance c/d76,250Mar. 31By Interest 75,000 ×10% for 2 months 1,250
  1,27,250   1,27,250
2019      
Aug. 01To Cash A/c 25,000 + 1,250 + 2,50028,750Aug. 01By Balance b/d 76,250
2020      
Jan. 31To Cash A/c 25,000 + 2,50027,500Aug. 01By Interest 75,000 × 10% for 4 months 2,500
Mar. 31To Balance c/d25,417Mar. 31By Interest 50,000 × 10% for 6 months 2,500
   Mar. 31By Interest 25,000 × 10% for 2 months 417
  81,667   81,667
2020      
Aug. 01To Cash A/c 25,000 + 417 + 83326,250Aug. 01By Balance b/d 25,417
   Aug. 01By Interest 25,000 × 10% for 4 months 833
  26,250   26,250

 

Working Notes:

Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

Average Profit=65,000 +60,000 +80,000 + 75,000
4
   
 =Rs 70,000

Advertisement-X

∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 2.5 = Rs 1,75,000

Adjustment of Goodwill

Old Ratio R, S and T = 5 : 3: 2
T died.
∴ New Ratio R and S = 5 : 3
Gaining Ratio = 5 : 3

T’s Share in Goodwill=1,75,000X2
10
     
 =Rs 35,000  

This share of goodwill is to be distributed between R and S in their gaining ratio i.e. 5 : 3.


R’s Share in Goodwill=35,000X5
8
     
 =Rs 21,875  

 

S’s Share in Goodwill=35,000X3
8
     
 =Rs 13,125  

 

Advertisement-X

Advertisement-Y

Calculation of T’s Share of Profit

Profit for 2017-18 = Rs 75,000

T’s Share of Profit for 2018-19=75,000X2X4
1012
       
 =Rs 5,000    

 

Revaluation Account
ParticularAmountParticularAmount
To Machinery10,000By Patents10,000
Profit transferred to: By Leasehold25,000
R’s Capital A/c12,500   
S’s Capital A/c7,500   
T’s Capital A/c5,000   
 81,350  81,350



T’s Capital Account
ParticularAmountParticularAmount
To Executor’s A/c1,21,000By Balance b/d75,000
To Goodwill A/c5,000By Workmen’s Compensation Reserve6,000
  By Profit and Loss Suspense A/c 5,000
  By R’s Capital A/c 21,875
  By S’s Capital A/c 13,125
  By Revaluation A/c Profit 5,000
 1,26,000  1,26,000

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

 

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 !!