Question 84 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 84 Chapter 5 of +2-A

Question 84 Chapter 5 of +2-A

84.Following is the Balance Sheet of X and Y as at 31st March, 2019 who are partners in a firm sharing profits and losses in the ratio of 3 : 2 respectively:

Liabilities     Assets    
Creditors   45,000 Cash at Bank   15,000
General Reserve   36,000 Debtors 60,000  
Capital A/cs:     Less: Provision for Doubtful Debts 2,400 57,600
X 1,80,000   Patents   44,400
Y 90,000 2,70,000 Investments   24,000
Current A/cs:     Fixed Assets   2,16,000
X 30,000   Goodwill   30,000
Y 6,000 36,000      
    3,87,000     3,87,000

Z is admitted as a new partner on 1st April, 2019 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to 15,000.
(c) An accrued income of 4,500 does not appear in the books of the firm. It is now to be recorded.
(d) X takes over the Investments at an agreed value of 18,000
.(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
(f) Z will bring in 60,000 as his capital by cheque.
(g) Z is to pay an amount equal to his share in firm’s goodwill valued at twice the average profit of the last three years which were 90,000; 78,000 and 75,000 respectively.
(h) Half of the amount of goodwill is to be withdrawn by X and Y. You are required to pass Journal entries, prepare Revaluation Account, Partners’ Capital and Current Accounts and the Balance Sheet of the new firm.

 

 

The solution of Question 84 Chapter 5 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
Prov. for D. Debts   600 Accrued Income   4,500
Outstanding Rent   15,000      
Investment   6,000      
           
      Loss transferred to    
      X’s Current A/c 10,260  
      Y’s Current A/c 6,840 17,100
    21,600     21,600

 

Partners’ Capital Account
Parti
culars
X Y
Z

Partic
ulars

X
Y Z
        By Balance B/d 1,80,000 90,000
        By Bank A/c A/c 60,000
To Balance c/d 1,80,000 90,000 60,000        
  1,80,000 90,000 60,000   30,000 90,000 60,000

 

Partners’ Capital Account
Parti
culars
X Y
Z

Partic
ulars

X
Y Z
To Revaluation A/c 10,260 6,840 By Balance B/d 30,000 6,000
To Goodwill A/c 18,000 12,000 By General Reserve 21,600 14,400  
To Bank A/c 12,600 5,400 By Premium for Goodwill 25,200 10,800  
To Investments A/c 18,000        
To Balance c/d 17,940 6,960      
  76,800 31,200   76,800 31,200



Balance Sheet
Liabilities
Amount Assets Amount
Creditors   45,000 Patents   44,400
Outstanding Rent   15,000 Fixed Assets   2,16,000
Capital A/cs:     Accrued Income   4,500
X     Debtors 60,000  
Y 1,80,000   Less: 5% Reserve for D. Debts 3,000 57,000
Z 90,000   Cash at Bank (15,000 + 96,000 – 18,000) 93,000
C 60,000 3,30,000      
Current A/cs:          
X 17,940        
Y 6,960 24,900      
    4,14,900     4,14,900

 

Date Particulars
L.F. Debit Credit
  Cash A/c Dr   96,000  
  To Z’s Capital       60,000
  To Premium for Goodwill A/c       36,000
  (Z brought Capital and share of goodwill)        
  Premium for Goodwill A/c Dr   36,000  
  To X’s Current A/c       25,200
  To Y’s Current A/c       10,800
  (Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 7:3)        
  X’s Current A/c Dr   12,600  
  Y’s Current A/c Dr   5,400  
  To Bank A/c       18,000
  (Half of goodwill withdrawn by partners)        

 

Working Note:-

Calculation of Z’s Share of Premium for Goodwill

Average Profit = 90,000+78,000+75,000/3
  = Rs 81,000
Firm’s Goodwill = 81,000×2
  = Rs 1,62,000
Z’s share = 1,62,000×2/9
  = Rs 36,000

Calculation of Sacrificing Ratio
Sacrificing Ratio=Old Ratio-New

X’s Sacrificing Ratio = 3 4
5 9
  = 27 – 20
45
  = 7  
  45
Y’s Sacrificing Ratio = 2 4
5 9
  = 18 – 15 
45
  = 3
  45

Sacrificing Ratio of X and Y= 7 : 3

Calculation of Share of Premium of Goodwill

Distribution of Premium for Goodwill

 

X will get = 36,000 X 7
10
  = 25,200
   
Y will get = 36,000 X 3
10
  = 10,800    

Valuation of Goodwill

X will get = 17,100 X 3
5
  = 10,260
   
Y will get = 17,100 X 2
5
  = 6,840
   

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 84 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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