Question 77 Chapter 5 of +2-A
77. Following is the Balance Sheet of the firm, Ashirvad, owned by A, B and C who share profits and losses of the business in the ratio of 3 : 2 : 1.
| Liabilities | Assets | |||
| Capital A/cs: | Furniture | 95,000 | ||
| A | 1,20,000 | Business | 2,05,000 | |
| B | 1,20,000 | Premises Stock-in Trade | 40,000 | |
| C | 1,20,000 | 3,60,000 | Debtors | 28,000 |
| Sundry Creditors | 20,000 | Cash at Bank | 15,000 | |
| Outstanding Salaries and wages | 7,200 | Cash in Hand | 4,200 | |
| 3,87,200 | 3,87,200 |
On 1st April, 2019, they admit D as a partner on the following conditions:
(a) D will bring in 1,20,000 as his capital and also 30,000 as goodwill premium for a quarter of the share in the future profits/losses of the firm.
(b) Values of the fixed assets of the firm will be increased by 10% before the admission of D.
(c) Mohan, an old customer whose account was written off as bad debts, has promised to pay 3,000 in full settlement of his dues.
(d) Future profits and losses of the firm will be shared equally by all the partners. Pass the necessary Journal entries and prepare Revaluation Account, Partners’ Capital Accounts and opening Balance Sheet of the new firm
The solution of Question 77 Chapter 5 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| Furniture | 95,000 × 10% | 9,500 | |||
| Business Premises | 2,05,000 × 10% | 20,500 | |||
| To Profit Transferred to: | |||||
| A Capital | 15,000 | ||||
| B Capital | 10,000 | ||||
| C Capital | 5,000 | 30,000 | |||
| 30,000 | 30,000 | ||||
| Partners’ Capital Account the year ended 31st March, 2019 |
||||
| Particulars | A | B | C |
D |
| A’s Capital (Goodwill) | – | – | 7,500 | – |
| B’s Capital (Goodwill) | – | – | 2,500 | – |
| To Balance c/d | 1,65,000 |
1,40,000 | 1,12,000 | 1,20,000 |
| 1,65,000 | 1,40,000 | 1,25,000 | 1,20,000 | |
|
Particulars |
A |
B | C |
D |
| By Balance B/d | 1,20,000 | 1,20,000 | 1,20,000 | – |
| By Revaluation (Profit) A/c |
15,000 | 10,000 | 5,000 | – |
| By Cash A/c |
– | – | – | 1,20,000 |
| By Premium for Goodwill A/c |
22,500 | 7,500 | – | – |
| By C’s Capital (Goodwill) A/c |
7,500 | 2,500 | – | – |
| 1,65,000 | 1,40,000 | 1,25,000 | 1,20,000 |
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Sundry Creditor | 20,000 | Furniture | (95,000 + 9,500) | 1,04,500 | |
| Outstanding salaries and wages | 7,200 | Business Premises | (2,05,000+20,500) | 2,25,500 | |
| Stock-in-Trade | 40,000 | ||||
| Capital: | Debtors | 28,000 | |||
| A | 1,65,000 | Cash at Bank | 15,000 | ||
| B | 1,40,000 | Cash in hand | (4,200 + 1,50,000) | 1,54,200 | |
| C | 1,15,000 | ||||
| D | 1,20,000 | 5,40,000 | |||
| 5,67,200 | 5,67,200 | ||||
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Working Note:-
Calculation of Sacrificing Ratio
Old Ratio of A, Band C = 3 : 2 : 1
New Ratio = 1 : : 1 : 1 : 1
Sacrificing Ratio = Old Ratio − New Ratio
| A’s Sacrificing Ratio | = | 3 | – | 1 |
| 6 | 4 |
| = | 12 – 6 | |
| 24 |
| = | 6 | |
| 24 |
| B’s Sacrificing Ratio | = | 2 | – | 1 |
| 6 | 4 |
| = | 8 – 6 | |
| 24 |
| = | 2 | |
| 24 |
| C’s Sacrificing Ratio | = | 1 | – | 1 |
| 6 | 4 |
| = | 4 – 6 | |
| 24 |
| = | -2 | |
| 24 |
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| Sacrifice Ratio of A and B | = | |
| = | 3 : 1 |
Calculation of C’s gain in goodwill
| Goodwill of the firm | = | D’s goodwill | X | 4 |
| 1 |
| = | 30,000 | X | 4 | |
| 1 | ||||
| = | 1,20,000 |
| C’s Goodwill | = | 1,20,000 | X | 2 |
| 24 | ||||
| = | 10,000 |
Amount of Goodwill to be distributed between A and B (Sacrificing Partners)
| A will get | = | 30,000 | X | 3 |
| 4 | ||||
| = | 22,500 |
| B will get | = | 30,000 | X | 1 |
| 4 | ||||
| = | 7,500 |
Distributed of C’s Gain in goodwill
| A will get | = | 10,000 | X | 3 |
| 4 | ||||
| = | 7,500 |
| B will get | = | 10,000 | X | 1 |
| 4 | ||||
| = | 2,500 |
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
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- 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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
