Question 90 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 90 Chapter 5 of +2-A

Question 90 Chapter 5 of +2-A

90. Shikhar and Rohit were partners in a firm sharing profits in the ratio of 7 : 3. On 1st April, 2013, they admitted Kavi as a new partner for 1/4th share in profits of the firm. Kavi brought 4,30,000 as his capital and 25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows:

Liabilities     Assets    
Capital A/cs:     Land and Building   3,50,000
Shikhar 8,00,000   Machinery   4,50,000
Rohit 3,50,000 11,50,000 Debtors 2,20,000  
General Reserve   1,00,000 Less: Provision 20,000 2,00,000
Workmen’s Compensation Fund   1,00,000 Stock   3,50,000
Creditors   1,50,000 Cash   1,50,000
    15,00,000     15,00,000

It was agreed that:
(a) the value of Land and Building will be appreciated by 20%.
(b) the value of Machinery will be depreciated by 10%.
(c) the liabilities of Workmen’s Compensation Fund were determined at 50,000.
(d) capitals of Shikhar and Rohit will be adjusted on the basis of Kavi’s capital and actual cash to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the new firm.

 

 

 

The solution of Question 90 Chapter 5 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
Machinery   45,000 Land and Building   70,000
           
           
Profit transferred to          
Shikhar’s Capital A/c 17,500        
Rohit’s Capital A/c 7,500 25,000      
    70,000     70,000

 

Partners’ Capital Account
Parti
culars
Shikhar Rohit Kavi

Partic
ulars

Shikhar Rohit Kavi
      By Balance B/d 8,00,000 3,50,000
        By General Reserve 70,000 30,000
        By Workmen’s Compensation Fund 35,000 15,000
        By Cash A/c 4,30,000
        By Premium for Goodwill 17,500 7,500
To Balance c/d 9,40,000 4,10,000 4,30,000 By Premium for Goodwill 17,500 7,500
               
  9,40,000 4,10,000 4,30,000   9,40,000 4,10,000 4,30,000
To Cash A/c 37,000 23,000 By Balance B/d 9,40,000 4,10,000 4,30,000
        By A’s Current A/c 60,550
To Balance c/d
9,03,000
3,87,000
4,30,000
       
  9,40,000 4,10,000 4,30,000   9,40,000 4,10,000 4,30,000

 

Balance Sheet
Liabilities
Amount Assets Amount
Liability for Workmen’s (70,000 – 1,200) 50,000 Land and Building   4,20,000
Compensation Creditors   1,50,000 Machinery 35,000  
Capital A/cs:     Less: Depreciation @10% 600 34,400
Shikhar 9,03,000   Debtors 2,20,000  
Rohit 3,87,000   Less: Prov. for Bad Debts 20,000 2,00,000
Kavi 4,30,000 17,20,000 Stock   3,50,000
      Cash   5,45,000
    19,20,000     19,20,000

 

Working Note:-

Old Ratio of Shikhar and Rohit = 3 : 2
Kavi’s = 1/4
Let the total share of the business = 1

Remaining share = 1 1
4
  = 4 – 1 
4
  = 3
  4

To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’

New Ratio = Combined share of A and B x Old Ratio

Shikhar’s New Ratio = 7 X 3
10 4
  = 12
  40
Rohit’s New Ratio = 3 X 3
10 4
  = 9
  10
Kavi’s New Ratio = 1 X 10
4 10
  = 10
  40

New Profit sharing Ratio between Shikhar , Rohit and Kavi = 21 : 9 : 10

Sacrificing Ratio = old Ratio – New Ratio

Shikhar’s Sacrificing Ratio = 7 21
10 40
  = 28 – 2 1
40
  = 7  
  40
Rohit’s Sacrificing Ratio = 3 9
10 40
  = 12 – 9
40
  = 3
  40

Sacrifice Ratio of Shikhar and Rohit = 7 : 3 

Distribution of Workmen’s Compensation Fund

Shikhar’s Share of Goodwill = 50,000 X 7
10
  = 35,000    
Rohit’s Share of Goodwill = 50,000 X 3
10
  = 15,000    

Distribution of General Reserve

Shikhar’s Share of Goodwill = 1,00,000 X 7
10
  = 70,000    

 

Rohit’s Share of Goodwill = 1,00,000 X 3
10
  = 30,000    

Adjustment of Capital

Total Capital of Firm = Capital Brought in by Kavi X Reciprocal of his Share
Capital bought by Kavi = 4,30,000
Total capital of Firm = 4,30,000 X 4
1
  = 17,20,000    

Distribution of General Reserve

Shikhar’s New Capital = 17,20,000 X 21
40
  = 9,03,000    
Rohit’s Share of Goodwill = 17,20,000 X 9
40
  = 3,87,000    

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 90 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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