Question 89 Chapter 5 of +2-A
89. The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 : 1, as on 1st April, 2019 is as follows:
| Liabilities | Assets | |||
| Capital A/cs | Y’s Current Account | 7,000 | ||
| X | 1,75,000 | Land and Building | 1,75,000 | |
| Y | 1,50,000 | Plant and Machinery | 67,500 | |
| Z | 1,25,000 | 4,50,000 | Furniture | 80,000 |
| Current A/cs: | Investments | 36,500 | ||
| X | 4,000 | Bills Receivable | 17,000 | |
| Z | 6,000 | 10,000 | Sundry Debtors | 43,500 |
| General Reserve | 15,000 | Stock | 1,37,000 | |
| Profit and Loss A/c | 7,000 | Bank | 43,500 | |
| Creditors | 80,000 | |||
| Bills Payable | 45,000 | |||
| 6,07,000 | 6,07,000 |
On the above date, W is admitted as a partner on the following terms:
(a) W will bring 50,000 as his capital and get 1/6th share in the profits.
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of 7,004 will be created against bills receivable discounted earlier but now dishonored.
(e) The value of stock, furniture and investments is reduced by 20%, whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital Accounts of the partners will be adjusted on the basis of W’s Capital through their Current Accounts.
Prepare Revaluation Account, Partners’ Current Accounts and Capital Accounts.
The solution of Question 89 Chapter 5 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| Stock | 27,400 | Land and Building | 35,000 | ||
| Furniture | 16,000 | Plant and Machinery | 6,750 | ||
| Investments | 7,300 | ||||
| Loss transferred to | |||||
| X | 4,475 | ||||
| Y | 2,983 | ||||
| Z | 1,492 | 8,950 | |||
| 50,700 | 50,700 | ||||
| Partners’ Capital Account |
|||||||
| Parti culars |
X | Y | Z |
Partic |
X | Y | Z |
| To Balance b/d | – | 7,000 | – | By Balance B/d | 4,000 | – | 6,000 |
| To Revaluation (Loss | 4,475 | 2,983 | 1,492 | By General Reserve | 7,500 | 5,000 | 2,500 |
| By Cash | – | – | 10,000 | ||||
| By Profit and Loss A/c | 3,500 | 2,333 | 1,167 | ||||
| By Premium for Goodwill Capital A/c | 15,000 | – | – | ||||
| By Capital A/c | 75,000 | 50,000 | 75,000 | ||||
| To Balance c/d |
100,525 |
47,350 |
83,175 |
||||
| 1,05,000 | 57,333 | 84,667 | 1,05,000 | 57,333 | 84,667 | ||
| Partners’ Capital Account |
||||
| Particulars | X | Y | Z | W |
| Current A/c | 75,000 | 50,000 | 75,000 | |
| To Balance c/d |
1,00,000 |
1,00,000 |
50,000 |
50,000 |
| 1,75,000 | 1,75,000 | 1,25,000 | 50,000 | |
|
Particulars |
X | Y | Z | W |
| By Balance B/d | 1,75,000 | 1,50,000 | 1,25,000 | – |
| By Cash | – | – | – | 50,000 |
| 1,05,000 | 57,333 | 84,667 | 50,000 |
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Working Note:-
Sacrificing Ratio
Old Ratio = 3 : 2 : 1
New Ratio = 2 : 2 : 1 : 1
Sacrificing Ratio=Old Ratio-New Ratio
| X’s New Ratio | = | 3 | – | 2 |
| 6 | 6 |
| = | 3 – 2 | |
| 6 |
| = | 1 | ||
| 6 |
| Y’s New Ratio | = | 2 | – | 2 |
| 6 | 6 |
| = | 2 – 2 | |
| 6 |
| = | 0 | |
| 6 |
Only X has sacrificed.
Distribution of Goodwill
| W’s Share of Goodwill | = | 90,000 | X | 1 |
| 6 | ||||
| = | 15,000 |
Only X has sacrificed his share, therefore, he will get Rs 15,000
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)
- 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
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