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)
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