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Question 96 Chapter 5 of +2-A
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96. L, M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st March, 2015 was as follows:
| Liabilities | Assets | |||
| Creditors | 1,68,000 | Bank | 34,000 | |
| General Reserve | 42,000 | Debtors | 46,000 | |
| Capital’s A/c | Stock | 2,20,000 | ||
| L | 1,20,000 | Investment | 60,000 | |
| M | 80,000 | Furniture | 20,000 | |
| N | 40,000 | 2,40,00 | Machinery | 70,000 |
| 4,50,000 | 4,50,000 |
On the above date, O was admitted as a new partner and it was decided that:
(i) The new profit-sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at 1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was 36,000.
(iv) Machinery will be reduced to 58,000.
(v) A creditor of 6,000 was not likely to claim the amount and hence was to be written off.
(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm.
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The solution of Question 96 Chapter 5 of +2-A: –
| Revaluation Account | |||||
| Particular | Amount | Particular | Amount | ||
| To Investments A/c | 24,000 | By Creditors A/c | 6,000 | ||
| To Machinery A/c | 12,000 | ||||
| Loss on Revaluation | |||||
| L’s Capital | 15,000 | ||||
| M’s Capital | 10,000 | ||||
| N’s Capital | 5,000 | 30,000 | |||
| 36,000 | 36,000 | ||||
| Partners’ Capital Account | ||||
| Particulars | L | M | N | O |
| To Loss on Revaluation A/c | 15,000 | 10,000 | 5,000 | |
| To Balance c/d | 1,56,000 | 84,000 | 42,000 | 56,400 |
| 1,71,000 | 94,000 | 47,000 | 56,400 | |
Particulars | L | M | N | O |
| By Balance B/d | 1,20,000 | 80,000 | 40,000 | |
| By Bank A/c (WN2) | – | – | – | 56,400 |
| By Premium for Goodwill A/c | 30,000 | – | – | – |
| By General Reserve A/c | 21,000 | 14,000 | 7,000 | – |
| 1,71,000 | 94,000 | 47,000 | 56,400 |
| Balance Sheet | |||||
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 1,62,000 | Bank | (34,000+56,400+30,000) | 1,20,400 | |
| Debtors | 46,000 | ||||
| Stock | 2,20,000 | ||||
| Capital A/cs: | Investments | 36,000 | |||
| L | 1,56,000 | Furniture | 20,000 | ||
| M | 84,000 | Machinery | 58,000 | ||
| N | 42,000 | ||||
| O | 56,400 | 3,38,400 | |||
| 5,00,400 | 5,00,400 | ||||
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Working Note:-
Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio
| L’s Sacrificing Ratio | = | 3 | – | 2 |
| 6 | 6 |
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| = | 3 – 2 | |
| 6 |
| = | 1 | |
| 6 |
| M’s Sacrificing Ratio | = | 2 | – | 2 |
| 6 | 6 |
| = | 2 – 2 | |
| 6 |
| = | 0 | |
| 6 |
| N’s Sacrificing Ratio | = | 1 | – | 1 |
| 6 | 6 |
| = | 1 – 1 | |
| 6 |
| = | 0 | |
| 6 |
Adjustment of Goodwill
| O’s Share of Goodwill | = | 1,80,000 | X | 1 |
| 6 | ||||
| = | 30,000 |
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30,000 will be credited to L’s Capital A/c, as he is the only sacrificing Partner
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Calculation of O’s Proportionate Capital
| Adjustment of Old Capital of L | = | 1,20,000 + 21,000 + 30,000 – 15,000 |
| = | 1,56,000 | |
| Adjustment of Old Capital of M | = | 80,000 + 14,000 – 10,000 |
| = | 84,000 | |
| Adjustment of Old Capital of N | = | 40,000 + 7,000 – 5,000 |
| = | 72,000 | |
| Total Adjustment Capital | = | 1,56,000 + 84,000 + 72,000 |
| = | 2,82,000 |
O’s Proportionate Capital = Total Adjusted Capital X O’s Profit Share X Reciprocal of combined new Share of Old Partner
| O’s Share of Goodwill | = | 2,82,000 | x | 1 | x | 5 |
| 6 | 5 | |||||
| = | 56,400 |
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
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- 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
