Question 95 Chapter 5 of +2-A
95. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decide to admit C as a new partner w.e.f. 1st April, 2019. In future, profits will be shared equally. The Balance Sheet of A and B as at 1st April, 2019 and the terms of admission are:
| Liabilities | Assets | |||
| Sundry Creditors | 60,000 | Cash in Bank | 40,000 | |
| Outstanding Expenses | 15,000 | Sundry Debtors | 36,000 | |
| Capital A/cs: | Stock | 84,000 | ||
| A | 3,00,000 | Furniture and Fittings | 65,000 | |
| B | 3,00,000 | 6,00,000 | Plant and Machinery | 4,50,000 |
| 6,75,000 | 6,75,000 |
(a)Capital of the firm is fixed at 6,00,000 to be contributed by partners in the profit-sharing ratio. The difference will be adjusted in cash.
(b) C to bring in his share of capital and goodwill in cash. Goodwill of the firm is to be valued on the basis of two years’ purchases of super profit. The average net profits expected in the future by the firm 90,000 per year. The normal rate of return on capital in similar business is 10%.
(c) The partners agreed to help maintain the plants and keep the area clean. Calculate goodwill and prepare Partners’ Capital Accounts and Bank Account.
The solution of Question 95 Chapter 5 of +2-A: –
| Partners’ Capital Account |
|||||||
| Parti culars |
A | B | C |
Partic |
A | B | C |
| To Bank A/c | 1,16,000 | 1,04,000 | – | By Balance B/d | 3,00,000 | 3,00,000 | – |
| By Bank | – | – | 2,00,000 | ||||
| By Premium for Goodwill | 16,000 | 14,000 | – | ||||
| To Balance c/d | 2,00,000 | 2,00,000 | 2,00,000 | ||||
| 3,16,000 | 3,04,000 | 2,00,000 | 3,16,000 | 3,04,000 | 2,00,000 | ||
| Bank A/c | |||||
| Particulars |
Amount | Particulars | Amount | ||
| To balance b/d | 40,000 | By A’s Capital A/c | 1,16,000 | ||
| To C’s Capital A/c | 2,00,000 | By B’s Capital A/c | 1,04,000 | ||
| To Premium for Goodwill A/c | 20,000 | By balance c/d | 40,000 | ||
| 2,60,000 | 2,60,000 | ||||
Working Note:-
Calculation of Sacrificing Ratio
Old Ratio of A and B= 3 : 2
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