Question 77 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 77 Chapter 5 of +2-A

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

 

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
Sacrifice Ratio of A and B = 6 : 2
  = 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. Gre
wal’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 77 Chapter 5 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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