Question 89 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 89 Chapter 5 of +2-A

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
ulars

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

 

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)

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 89 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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