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Question 96 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 96 Chapter 5 of +2-A
Question No.96 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

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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 1,68,000Bank34,000
General Reserve 42,000Debtors46,000
Capital’s A/c  Stock2,20,000
L1,20,000 Investment60,000
M80,000 Furniture20,000
N40,0002,40,00Machinery70,000
  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
AmountParticularAmount
To Investments A/c 24,000By Creditors A/c 6,000
To Machinery A/c 12,000   
   Loss on Revaluation  
   L’s Capital15,000 
   M’s Capital10,000 
   N’s Capital5,00030,000
  36,000  36,000

 

Partners’ Capital Account
ParticularsLMNO
To Loss on Revaluation A/c15,00010,0005,000 
     
     
     
To Balance c/d 1,56,00084,00042,00056,400
 1,71,00094,00047,00056,400

 

Particulars

LMNO
By Balance B/d1,20,00080,00040,000 
By Bank A/c (WN2)56,400
By Premium for Goodwill A/c30,000
By General Reserve A/c21,00014,0007,000
     
 1,71,00094,00047,00056,400

 

 

Balance Sheet
Liabilities
AmountAssetsAmount
Creditors 1,62,000Bank(34,000+56,400+30,000)1,20,400
   Debtors 46,000
   Stock 2,20,000
Capital A/cs:  Investments 36,000
L1,56,000 Furniture 20,000
M84,000 Machinery 58,000
N42,000    
O56,4003,38,400   
  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=32
66

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 =3 – 2
6
 =1
 6

 

M’s Sacrificing Ratio=22
66
 =2 – 2
6
 =0
 6

 

N’s Sacrificing Ratio=11
66
 =1 – 1
6
 =0
 6

Adjustment of Goodwill

O’s Share of Goodwill=1,80,000X1
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=2,82,000x1x5
65
 =56,400    

 

 

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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Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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