Question 80 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 80 Chapter 5 of +2-A

Question 80 Chapter 5 of +2-A

80.Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019 their Balance Sheet was:

Liabilities     Assets    
Sundry Creditors   16,000 Cash in Hand   1,200
Public Deposits   61,000 Cash at Bank   2,800
Bank Overdraft   6,000 Stock   32,000
Outstanding Liabilities   2,000 Prepaid Insurance   1,000
Capital A/cs:     Sundry Debtors 28,000  
Deepika 48,000   Less: Provision for Doubtful Debt 800 27,200
Rajshre 40,000 88,00 Plant and Machinery   48,000
      Land and Building   50,000
      Furniture   10,00
    1,73,000     1,73,000

On 1st April, 2019 the partners admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners, therefore, decide to calculate the goodwill on the basis of Anshu’s share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at 60,000, Stock at 40,000 and the Provision for Doubtful Debts is to be maintained at 4,000. Value of Land and Building has appreciated by 20%. Furniture has been depreciated by 10%.
(e) There is an additional liability of 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of Deepika, Rajshree and Anshu.

 

 

The solution of Question 80 Chapter 5 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
Reserve for D. Debts 4,000   Plant and Machinery 60,000 – 48,000) 12,000
Less: Old Reserve 800 3,200 Stock (40,000 – 32,000) 8,000
Furniture 10,000X 10% 1,000 Land and Building (50,000 × 20%) 10,000
Outstanding salary   8,000      
Profit transferred to          
Deepika Capital 10,680        
Rajshree Capita 7,120 17,800      
    25,000     25,000

 

Partners’ Capital Account
the year ended 31st March, 2019

Parti
culars
Deepi
ka
Rajsh
ree
Anshu

Partic
ulars

Deepi
ka
Rajsh
ree
Anshu
        By Balance B/d 48,000 40,000
        By Revaluation 10,680 7,120
To Balance c/d (before adjustment of Goodwill) 58,680 47,120 32,000 By Cash A/c 32,000
  58,680 47,120 32,000   58,680 47,120 32,000
To Deepika’s Capita 2,220 By Balance B/d 58,680 47,120 32,000
To Rajshree’s Capita 2,220 By Anshu’s Capital (Goodwill) 2,220 2,220
To Balance c/d 60,900
49,340 30,000        
  60,900 49,340 32,000   60,900 49,340 32,000



Balance Sheet
Liabilities
Amount Assets Amount
Outstanding Salaries   8,000 Cash in Hand   1,200
Sundry Creditors   16,000 Cash at Bank   28,800
Public Deposits   61,000 Stock   40,000
Capital:     Debtors 28,800  
A 1,87,875   Less: 5% Provision for D. Debts 4,000 24,800
B 92,625   Plant and Machinery   60,000
C 30,000 3,10,500 Prepaid Insurance   1,000
Outstanding Liabilities   1,37,80 Land and Building   60,000
      Furniture   9,000
    2,24,800     2,24,800

Working Note:-

Calculation of Sacrificing Ratio
Old Ratio of Deepika and Rajshree = 3 : 2
New Ratio of Deepika , Rajshree and Anshu = 5 : 3 : 2

Sacrificing Ratio = Old Ratio − New Ratio

Deepika’s New Ratio = 3 5
5 10
  = 6- 5
10
  = 1
  10

 

Rajshree’s New Ratio = 2 3
5 10
  = 4 – 3
10
  = 1
  10

Sacrifice Ratio of Deepika and Rajshree= 1 : 1

Valuation of Goodwill

Capitalized value on the basis of Anshu’s share = 32,000 X 10
2
  = 1,60,000
   
Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000
  = Rs 1,37,800
Goodwill = Capitalized value − Actual Capital of all partners before adjustment of Goodwill
  = 1,60,000 − 1,37,800
  = 22,000

 

Valuation of Goodwill

Anshu’s share of Goodwill = 22,200 X 2
10
  = Rs 4,440
   
Deepika and Rajshree each will entitle for Goodwill = 4,440 X 1
2
  = Rs 2,220
   

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

 

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2 Book 1 min - Question 80 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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