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Question 79 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 79 Chapter 6 of +2-A
Question No.79 Chapter No.6 - T.S. Grewal +2 Book 2019-Solution

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Question 79 Chapter 6 of +2-A

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79. The Balance Sheet of X, Y and Z as at 31st March, 2018 was

Liabilities Amount AssetsAmount
Bills Payable 2,000Cash at Bank5,800
Employees’ Provident Fund 5,000Bills Receivable800
Workmen Compensation Reserve 6,000Stock9,000
General Reserve 6,000Sundry Debtors16,000
Loans 7,100Furniture2,000
Capital A/cs:  Plant and Machinery6,500
X22,750 Building30,000
Y15,250 Advertising Suspense6,000
Z12,00050,000  
  76,100 76,100

The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
a Goodwill is to be calculated on the basis of three years’ purchase of the five years’ average profit. The profits were: 2017-18: 24,000; 2016-17: 16,000; 2015-16: 20,000 and 2014- 15: 10,000 and 2013-14: 5,000.
b The deceased partner to be given a share of profits till the date of death on the basis of profits for the previous year.
c The Assets have been revalued as: Stock 10,000; Debtors 15,000; Furniture 1,500; Plant and Machinery 5,000; Building 35,000. A Bill Receivable for 600 was found worthless. d A Sum of 12,233 was paid immediately to Z’s Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding. Give Journal entries and show the Z’s Executors’ Account till it is finally settled

 

The solution of Question 79 Chapter 6 of +2-A: –

 

DateParticulars
L.F.DebitCredit
 Workmen’s Compensation ReserveDr. 6,000 
 To X’s Capital A/c   3,000
 To Y’s Capital A/c   2,000
 To Z’s Capital A/c   1,000
 (Being Workmen’s Compensation Reserve distributed among partners in their old ratio)   
 General Reserve A/cDr. 6,000 
 To Z’s Capital A/c   3,000
 To Y’s Capital A/c   2,000
 To Z’s Capital A/c   1,000
 (Being General Reserve distributed among partners in their old ratio)    
 X’ Capital A/cDr. 3,000 
 Y’s Capital A/cDr. 2,000 
 Z’s Capital A/cDr. 1,000 
 To Advertisement Suspense A/c   6,000
 (Being Goodwill written off among partners in their old ratio)    
 X’s Capital A/cDr. 4,500 
 Y’s Capital A/cDr. 3,000 
 To Z’s Capital A/c   7,500
 (Being T’s share of goodwill adjusted)    
 Revaluation A/cDr. 3,600 
 To Sundry debtors A/c   1,000
 To Furniture A/c   500
 To Plant and Machinery A/c   1,500
 To Bills Receivable A/c   600
 (Being Decrease in value of Assets transferred to Revaluation Account)    
 Stock A/cDr. 1,000 
 Building A/cDr. 5,000 
 To Revaluation A/c   6,000
 (Being Increase in value of Assets transferred to Revaluation Account)    
 Revaluation A/cDr. 2,400 
 To X’ Capital A/c   1,200
 To Y’s Capital A/c   800
 To Z’s Capital A/c   400
 (Being Revaluation profit distributed among partners in their old ratio )    
 Profit and Loss Suspense A/cDr. 1,333 
 To Z’s Capital A/c   1,333
 (Being Z’s share of profit transferred his capital account)    
 Z’s Capital A/cDr. 22,233 
 To Z’s Executor’s A/c   22,233
 (Being Amount due to Z transferred to his Executor’s Account)    
 (Being Amount due to Z transferred to his Executor’s Account)    
 Z’s Executor’s A/cDr. 12,333 
 To Bank A/c   12,333
 (Being Amount paid to Z’s Executor)    

 

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Z’s Executor’s Account
DateParticularAmountDateParticularAmount
2018     
July 31To Bank A/c12,233July 31By Z’s Capital A/c22,233
2019     
Mar. 31To Cash A/c 25,000 + 5,00010,667Mar. 31By Interest 10,000 × 10% for 8 months 5,000
  22,900   22,900
2019      
July. 01To Bank A/c 5,000 + 667 + 3336,000Aug. 01By Balance b/d 10,667
2020      
Mar. 31To Balance c/d5,333Aug. 01By Interest 75,000 × 10% for 4 months 333
   Mar. 31By Interest 5,000 × 10% for 8 month 333
  11,333   11,333
2020      
Aug. 01To Bank A/c 5,000 + 333 + 1675,500Aug. 01By Balance b/d 5,333
   Aug. 01By Interest 25,000 × 10% for 4 months 167
  5,500   5,500



 

 

Working Notes:

Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

Average Profit=24,000 + 16,000 + 20,000 + 10,000 + 5,000
5
   
 =Rs 15,000

∴ Goodwill = Average Profit × Number of Years’ Purchase
=15,000 × 3 = Rs 45,000

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Adjustment of Goodwill

Old Ratio = 3 : 2 : 1
Z died.
∴ New Ratio X and Y = 3 : 1
Gaining Ratio = 3 : 2

Z’s Share in Goodwill=45,000X1
6
     
 =Rs 7,500  

This share of goodwill is to be distributed between X and Y in their gaining ratio i.e. 3 : 1.


X’s Share in Goodwill=7,500X3
5
     
 =Rs 4,500  

 

Y’s Share in Goodwill=7,500X2
5
     
 =Rs 3,000  

 

Calculation Z’s Share of Prof

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Profit for 2017-18 Immediate Previous Year = Rs 24,000

∴ Z’s Profit Share=24,000X1X4
612
       
 =Rs 1,333    
Revaluation Account
ParticularAmountParticularAmount
To Sundry Debtors1,000By Balance b/d80,000
To Furniture500By Interest on Capital A/c1,600
To Plant and Machinery1,500   
To Bills Receivable600   
Profit transferred to:    
X’s Capital A/c1,200   
Y’s Capital A/c800   
Z’s Capital A/c400   
 6,000  6,000


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

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