Read TS Grewal Accountancy Class 12 Solution Chapter 5 Admission of a Partner 2023 2024. Students should study TS Grewal Solutions Class 12 Accountancy available on Studiestoday.com with solved questions and answers. These chapter-wise answers for Class 12 Accountancy have been prepared by expert teachers of Grade 12. These TS Grewal Class 12 Solutions have been designed as per the latest accountancy TS Grewal Book for Class 12 and if practiced thoroughly can help you to score good marks in standard 12 Accounts class tests and examinations.
Class 12 Accounts Chapter 5 Admission of a Partner TS Grewal Solutions
TS Grewal Solutions for Chapter 5 Admission of a Partner Class 12 Accounts have been provided below based on the latest TS Grewal Class 12 book. The answers have been prepared based on the latest 2023 2024 book for the current academic year. TS Grewal Solutions Class 12 will help students to improve their concepts and easily solve accountancy questions for Class 12. Class 12 Grewal solutions should be revised regularly as more practice will help you get a better rank and easily solve more questions.
Chapter 5 Admission of a Partner TS Grewal Class 12 Solutions
About this chapter: TS Grewal Class 12 Chapter 5 Admission of a Partner is an important chapter for Class 12 students. Lot of questions are asked in the exams from this chapter. This chapter explains the process of admitting a new partner into an existing partnership. There are detailed explanation regarding reasons why a partnership might admit a new partner, which is sometimes due to need for additional capital, skills or expertise. It explains that a partnership agreement should be defined, which outlines the terms and conditions of the partnership. Students will be able to understand different methods of admitting a new partner, including the payment of premium and goodwill, and the adjustment of the capital accounts of existing partners. Various accounting entries have to be passed during the admission of a partner. By going through the concepts explained here students will be able to understand the accounting treatment for admission of a partner, including the preparation of a new balance sheet and the revaluation of assets and liabilities. We have provided solutions to all questions given in this chapter which will be easy for students to learn and even use for their Class 12 exams.
Very Short Answer Type Questions
Question 1. What do you understand by admission of a partner?
Answer:
When a new partner is admitted into the firm, it is known as admission of a new partner. On admission of a new partner, old partnership comes to an end new partnership comes into existence.
Question 2. How is new partner admitted to the firm?
Answer:
A person can be admitted as a new partner:
1.) If it is so agreed in the Partnership Deed, or
2.) In the absence of the Partnership Deed, if all the partners agree for the admission.
Question 3. State any one purpose of admitting a new partner in a firm.
Answer:
The purpose of admitting a new partner in a firm new or incoming partner becomes entitled to share future profit of the firm and the combined share of the old partners gets reduced.
Question 4. List any two matters that need adjustments at the time of admission of a partner.
Answer:
(i) Adjustment of Accumulated Profit, Reserves and Losses.
(ii) Adjustment of Goodwill.
Question 5. State one right acquired by a newly admitted partner.
Answer:
Rights of a newly admitted partner:-
1.) Right to share future profit of the firm.
Question 6. State the other right which a newly admitted partner acquires besides the right to share the profit of the firm.
Answer:
Rights of a newly admitted partner:-
1.) Right to share in the assets of the firm.
Question 7. State the two main rights that a newly admitted partner acquires in the firm.
or
State the rights acquired by a newly admitted partner.
Answer:
Rights of a newly admitted partner:-
1.) Right to share future profit of the firm.
2.) Right to share in the assets of the firm.
Question 8. State the need for treatment of goodwill on admission of a partner.
Answer:
Goodwill is an intangible asset which enables a firm to earn higher profit than the normal profit earned by other firms in the industry. It arises due to efforts made by the existing partners in the past. The goodwill so generated is known as internally, i.e., self-generated goodwill.
Question 9. State the reason of contributing for goodwill by a new partner at the time of his admission.
or
Why should a new partner contribute towards goodwill on his admission?
Answer:
At the time of admission, new partner who acquires the share in future profit from the existing partners should compensate sacrificing partners by paying them an amount, termed as goodwill or premium of goodwill.
Question 10. If the new partner brings in his share of goodwill in cash and if goodwill also appears in books, how is existing amount of goodwill dealt with?
Answer:
When the new or incoming partner brings goodwill in cash or by cheque for his share of goodwill, it is transferred to Capital Accounts of the sacrificing partners in their sacrificing ratio.
Question 11. What is meant by "Sacrificing Ratio"?
Answer:
Sacrificing Ratio is sacrificed share in profit of two or more partners in term of ratio. Sacrificed share of each partner is calculated as follows:
Sacrificed Share = Old Profit Share – New Profit Share.
Question 12. At the time of admission of a partner, who decides what will be the out of the firm's profit?
Answer:
Partnership is a result of mutual agreement between partners who agree to share profit in some ratio. The share of profit to be taken by new partner is dependent upon the agreement with other partners.
Question 13. Unless given otherwise, what will be the ratio of sacrifice of the old a new partner?
Answer:
Sacrificing ratio may be given to the new or incoming partner by all the old partners equally or by all or some of the partners in agreed ratio.
Question 14. State the ratio in which the old partners share accumulated profit, reserve and losses.
Answer:
The old partners share accumulated profit, reserve and losses in their old ratio.
Question 15. Give two circumstances in which the sacrificing ratio is applied.
[Hints: (i) At the time of admission of a new partner for distributing goodwill brought in by him.
(ii) For adjusting goodwill in the case of change in the profit-sharing ratio of the existing partners.)
Answer:
(i) At the time of admission of a new partner for distributing goodwill brought in by him.
(ii) For adjusting goodwill in the case of change in the profit-sharing ratio of the existing partners.
Question 16. Define New Profit-Sharing Ratio in the case of admission of a partner?
Answer:
The ratio in which all partners, including the incoming partner, will share the profit and losses in future is known as New Profit-sharing Ratio.
Question 17. Why do we distribute reserves, accumulated profits and losses among the old partners?
Answer:
At the time of admission of a new partner, reserves or accumulated profits in the books of the firm should be transferred to the old partners' capital or current accounts in the old ratio, because these items belong to the old partners only.
Question 18. What is meant by Revaluation Account?
Answer:
The change in value of assets and liabilities is adjusted through an account titled Revaluation Account or Profit and loss Adjustment Account. Increase in the value of assets and decrease in the amount of liabilities is credited to Revaluation Account, it being a gain. On the other hand, decrease in value of assets and increase in amount of liabilities is debited to the account, it belong loss.
Question 19. Why is it necessary to revalue assets and liabilities of a firm in case of admission of a partner?
Answer:
When a new partner is admitted, assets are revalued and liabilities are reassessed so that the gain or loss arising on account of such revaluation up to the date of admission of a new partner may be ascertained and adjusted in the Old partners’ Capital Account in their old profit-sharing ratio and the new partner should neither gain nor suffer because of change in the value of assets or amount of liabilities.
Question 20. In which account increase in the value of asset is credited on the admission of a new partner?
Answer:
In Revaluation Account increase in the value of assets is credited on the admission of a new partner.
Question 21. State whether Revaluation Account is debited or credited to record the increase in the value of Plant and Machinery.
Answer:
If the value of Plant and Machinery is increased Revaluation Account is credited.
Question 22. State whether Revaluation Account is debited or credited to record the decrease in the value of Plant and Machinery.
Answer:
If the value of Plant and Machinery is increased Revaluation Account is debited.
Question 23. State whether Revaluation Account is debited or credited to record the decrease in the amount of creditors.
Answer:
Revaluation Account is credited to record the decrease in the amount of creditors.
Question 24. State whether Revaluation Account is debited or credited to record the increase in the amount of creditors.
Answer:
Revaluation Account is debited to record the increase in the amount of creditors.
Question 25. State whether Revaluation Account is debited or credited to record an unrecorded asset.
Answer:
Revaluation Account is credited to record an unrecorded asset.
Question 26. State whether Revaluation Account is debited or credited to record the increase in Provision for Doubtful Debts.
Answer:
Revaluation Account is debited to record the increase in Provision for Doubtful Debts.
Question 27. State any two reasons for the preparation of Revaluation Account on the admission of a new partner.
Answer:
Reasons for the preparation of Revaluation Account on the admission of a new partner:-
(i) Assets and Liabilities may appear in the books at revised (new) values.
(ii) Assets and Liabilities may appear in the books at old values.
Question 28. State whether the Partner's Capital Account is debited or credited to record the gain of Revaluation Account.
Answer:
If the gain in Revaluation Account profit will be transferred to the Old partners’ Capital Account (in the old profit sharing ratio) and same will be credited in the Partners’ Capital Account.
Question 29. State whether the Partner's Capital Account is debited or credited to record the loss of Revaluation Account.
Answer:
If the loss in Revaluation Account loss will be transferred to the Old partners’ Capital Account (in the old profit sharing ratio) and same will be debited in the Partners’ Capital Account.
Question 30. State the ratio in which the partners share the gain or loss on revaluation of assets and liabilities.
Answer:
In the Old Profit sharing ratio the partners share the gain or loss on revaluation of assets and liabilities.
Question 31. When the General Reserve is distributed, are the Partners' Capital Accounts debited or credited?
Answer:
At the time of distribution of General Reserve Partner’s Capital Account is credited.
Question 32. Under what circumstances will the premium for goodwill paid by the incoming partner not be recorded in the books of account?
Answer:
Premium for Goodwill is not recorded in the books of account when the incoming partner pays it privately to the sacrificing partners.
Question 33. State with reason whether at the time of admission of a partner, partnership is dissolved or partnership firm is dissolved.
Answer:
At the time of admission of a partner only partnership is dissolved and not the partnership firm as there is change in the existing agreement and a new agreement comes into existence.
Question 34. Amit and Beena were partners in a firm sharing profits and losses in the ratio of 3:1. Chaman was admitted as a new partner for 1/6th share in the profits. Chaman acquires 2/5th of his share from Amit. How much share did Chaman acquire from Beena?
Answer:
Question 35. A, B and C are partners having capitals of Rs. 3,00,000, Rs. 2,00,000 and Rs. 1,00,000. They admit D as a partner for 1/5th share on 1st April, 2019. On this day, the firm has reserve of Rs. 60,000. A and B demand that reserve should be shared in proportion of capital whereas C is of the opinion that it should be shared equally as they do not have partnership deed. A and B agree to C’s viewpoint.
What argument must have been put by C that convinced both A and B?
Answer:
In the absence of partnership deed reserves should be divided equally between the partners. Hence C’s point of view is correct.
Question 37. X and Y are partners sharing profits and losses equally. They admit Z as partner for 1/3rd share which he takes from Y. Z bring Rs. 50,000 as his share of goodwill. X is of the opinion that goodwill brought by Z should be shared whereas Y is of the opinion that Rs. 50,000 should be credited to his capital. X finally agrees to Y’s view.
What argument must have been given by Y that made X agree?
Answer:
No, entry will be passed in the books as Z has paid his share of goodwill to Y for credited to his capital account. By this only Y’s Capital is increased.
Question 38. Geeta, Sunita and Anita were partners in a firm sharing profit in the ratio 5:3:2. On 1st January, 2015, they admitted Yogita as a new partner for 1/10th share in the profit. On Yogita’s admission, the Profit and Loss Account of the firm was showing a debit balance of Rs. 20,000 which was credited by the accountant of the firm to the Capital Accounts of Geeta, Sunita and Anita in their profit-sharing ratio. Did the accountant give correct treatment? Give reason in support of your answer.
Answer:
No, the accountant did not give correct treatment as the debit balance of Profit and Loss Account shows loss, it should be debited to the Partner’s Capital Account.
Question 39. Karan, Nakul and Asha were partners in a firm sharing profit and losses in the ratio 3:2:1. At the time of admission of a partner, the goodwill of the firm was valued at Rs. 2,00,000. The accountant of the firm passed the entry in the books of account and thereafter showed goodwill at Rs. 2,00,000 as an asset in the Balance Sheet. Was he correct in doing so? Why?
Answer:
No, the accountant’s decision is not correct because according to AS-26, goodwill should be recorded in the books only when consideration in money or money’s worth has been paid for it.
Question 40. A, B, C and D were partners in a firm sharing profit in the ratio of 4:3:2:1. On 1st January, 2015, they admitted E as a new partner for 1/10 share in the profits. E brought Rs. 10,000 for his share of goodwill premium which was correctly recorded in the books by the accountant. The accountant showed goodwill at Rs. 1,00,000 in the books. Was the accountant correct in doing so? Give reason in support of your answer.
Answer:
No, the accountant was not correct in doing so.
Reason: Since the new partner has brought his share of goodwill in cash against self-generated goodwill, it cannot be recorded in the books of account. Only purchased goodwill can be recorded in the books of accounts as per AS-26.
EXERCISE ::->
Calculation of New Profit-Sharing Ratio and Sacrificing Ratio
Question 1: X, Y and Z are partners sharing profits and losses in the ratio of 5:3:2. They admit A into partnership and give him 1/5th share of profits. Find the new profit-sharing ratio.
Answer 1:
Old Ratio of X:Y:Z = 5:3:2
A is admitted for 1/5 th Share
Let the total profit of the firm be 1
Question 2: Ravi and Mukesh are sharing profits in the ratio of 7:3. They admit Ashok for 3/7th share in the firm which he takes 2/7th from Ravi and 1/7th from Mukesh. Calculate new profit-sharing ratio.
Answer 2:
Old Ratio of Ravi:Mukesh = 7:3
Question 3: A and B are partners sharing profits and losses in the proportion of 7:5. They agree to admit C, their manager, into partnership who is to get 1/6th share in the profits. He acquires this share as 1/24th from A and 1/8th from B . Calculate new profit-sharing ratio.
Answer 3:
Question 4: A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 ; 1. They admitted D as a new partner for 1/8th share in the profits, which he acquired 1/16th from C . Calculate the new profit-sharing ratio of A, B , C and D .
Answer 4:
Old Ratio of A:B:C = 3:2:1
Question 5: Bharati and Astha were partners sharing profits in the ratio of 3 : 2 . They admitted Dinkar as a new partner for 1/5th share in the future profits of the firm which he got equally from Bharati and Astha. Calculate the new profit-sharing ratio of Bharati , Astha and Dinkar.
Answer 5:
Old Ratio of Bharti:Astha = 3:2:1
Question 6: X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. Z is admitted as partner with 1/4 share in profit. Z acquires his share from X and Y in the ratio of 2 : 1. Calculate new profit-sharing ratio.
Answer 6:
Old Ratio of X:Y = 3:2
Question 7: R and S are partners sharing profits in the ratio of 5 : 3 . T joins the firm as a new partner. R gives 1/4th of his share and S gives 1/5th of his share to the new partner. Find out new profit-sharing ratio.
Answer 7:
Old Ratio of R:S = 5:3
Question 8: Kabir and Farid are partners in a firm sharing profits and losses in the ratio of 7 : 3 . Kabir surrenders 2/10th from his share and Farid surrenders 1/10th from his share in favour of Jyoti; the new partner. Calculate new profit-sharing ratio and sacrificing ratio.
Answer 8:
Old Ratio of Kabir:Farid = 7:3
Question 9: Find New Profit-sharing Ratio:
(i) R and T are partners in a firm sharing profits in the ratio of 3 : 2 . S joins the firm. R surrenders 1/4th of his share and T 1/5th of his share in favour of S.
(ii) A and B are partners . They admit C for 1/4th share. In future, the ratio between A and B would be 2 : 1 .
(iii) A and B are partners sharing profits and losses in the ratio of 3 : 2 . They admit C for 1/5th share in the profit . C acquires 1/5th of his share from A and 4/5th share from B.
(iv) X,Y and Z are partners in the ratio of 3 : 2 : 1 . W joins the firm as a new partner for 1/6th share in profits. Z would retain his original share.
(v) A and B are equal partners. They admit C and D as partners with 1/5th and 1/6th share respectively.
(vi) A and B are partners sharing profits/losses in the ratio of 3 : 2 . C is admitted for 1/4th share. A and B decide to share equally in future.
Answer 9:
Question 10: X and Y were partners sharing profits in the ratio of 3:2. They admitted P and Question as new partners X surrendered 1/3rd of his share in favour of P and Y surrendered 1/4th of his share in favour of Question . Calculate new profit-sharing ratio of X, Y, P and Question .
Answer 10:
Question 11: Rakesh and Suresh are sharing profits in the ratio of 4 : 3 . Zaheer joins and the new ratio among Rakesh, Suresh and Zaheer is 7 : 4 : 3. Find out the sacrificing ratio.
Answer 11:
Old Ratio of Rakesh:Suresh = 4:3
New Ratio of Rakesh:Suresh:Zaheer = 7:4:3
Sacrificing Ratio = Old Ratio – New Ratio
Question 12: A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. D is admitted for 1/3rd share in future profits . What is the sacrificing ratio?
Answer 12:
Old Ratio of A:B:C = 4:3:2
D is admitted for 1/3rd Share.
Let the total profit of the firm be 1.
Question 13: A and B are partners sharing profits in the ratio of 3 : 2. C is admitted as a partner . The new profit-sharing ratio among A, B and C is 4 : 3 : 2 . Find out the sacrificing ratio?
Answer 13:
Old Ratio of A:B = 3:2
New Ratio of A:B:C = 4:3:2
Sacrificing Ratio = Old Ratio – New Ratio
Question 14: A, B, C and D are in partnership sharing profits and losses in the ratio of 36:24:20:20 respectively. E joins the partnership for 20% share and A , B , C and D in future would share profits among themselves as 3/10 : 4/10 : 2/10 : 1/10. Calculate new profit-sharing ratio after E's admission.
Answer 14:
Old Ratio of A:B:C:D = 36:24:20:20 = 9:6:5:5
E is admitted for 20% = 20/100 = 1/5th Share
Let the total profit of the firm be 1.
Question 15: X and Y are partners sharing profits and losses in the ratio of 3:2. They admit Z into partnership. X gives 1/3rd of his share while Y gives 1/10th from his share to Z. Calculate new profit-sharing ratio and sacrificing ratio.
Answer 15:
Question 16: A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. D is admitted as a new partner for 1/6th share. C will retain his original share . Calculate the new profit-sharing ratio and sacrificing ratio.
Answer 16:
Old Ratio of A:B:C = 2:2:1
D is admitted for 1/6th share.
Let the total profit of the firm be 1.
Question 17: A and B are in partnership sharing profits and losses as 3:2. C is admitted for 1/4th share. Afterwards D enters for 20 paisa in the rupee. Compute profit-sharing ratio of A, B, C and D after D's admission.
Answer 17:
Old Ratio of A:B = 3:2
C is admitted for 1/4 th share.
Let the total profit of the firm be 1.
Question 18: P and Q are partners sharing profits in the ratio of 3 : 2. They admit R, a new partner who acquires 1/5th of his share from P and 4/25th share from Q. Calculate New Profit-sharing Ratio and sacrificing ratio.
Answer 18:
Old Ratio of P:Q = 3:2
Admission of a Partner and Treatment of Goodwill
When Premium for Goodwill is paid privately
Question 19: A and B are partners sharing profits and losses in the ratio of 2 : 1. They take C as a partner for 1/5th share. The Goodwill Account appears in the books at its full value Rs. 15,000. C is to pay proportionate amount as premium for goodwill which he pays to A and B privately.
Pass necessary entries.
Answer 19:
Note 1 :When Goodwill is paid privately then no entry is passed for treatment of goodwill in the books.
Goodwill/Premium for Goodwill is brought in Cash by the New Partner and Retained in the Business.
Question 20: A and B are partners sharing profits and losses in the ratio of 2:5. They admit C on the condition that he will bring in Rs. 14,000 as his share of goodwill in cash to be distributed between A and B. C's share in the future profits or losses will be 1/4th. What will be the new profit-sharing ratio and what amount of goodwill brought in by C will be received by A and B?
Answer 20:
Old Ratio of A:B = 2:5
C is admitted for 1/4 th share.
Let the total profit of the firm be 1.
Question 21: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2 . A new partner C is admitted. A surrenders 1/5th of his share and B surrenders 2/5th of his share and B surrenders 2/5th of his share in favour of C . For this purpose of C's admission, goodwill of the firm is valued at Rs. 75,000 and C brings in his share of goodwill in cash which is retained in the firm's books. Journalise the above transactions.
Answer 21:
Question 22: Give Journal entries to record the following arrangements in the books of the firm:
(a) B and C are partners sharing profits in the ratio of 3:2. D is admitted paying a premium (goodwill) of Rs. 2,000 for 1/4th share of the profits, shares of B and C remain as before.
(b) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of Rs. 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.
Answer 22:
Question 23: B and C are in Partnership sharing profits and losses as 3 : 1 . They admit D into the firm, D paying a premium of Rs. 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share the future profits and losses equally. Draft journal entries showing appropriations of the premium money.
Answer 23:
Question 24: M and J are partners in a firm sharing profits in the ratio of 3 : 2. They admit R as a new partner. The new profit-sharing ratio between M, J and R will be 5 : 3 : 2. R brought in Rs. 25,000 for his share of premium for goodwill. Pass necessary journal entries for the treatment of goodwill.
Answer 24:
Question 25: A and B are in partnership sharing profits and losses in the ratio of 5 : 3 . C is admitted as a partner who pays Rs. 40,000 as capital and the necessary amount of goodwill which is valued at Rs. 60,000 for the firm. His share of profits will be 1/5th which he takes 1/10th from A and 1/10th from B.
Give journal entries and also calculate future profit-sharing ratio of the partners.
Answer 25:
Question 26: A and B are partners sharing profits and losses in the proportion of 7 : 5 . They agree to admit C, their Manager, into partnership who is to get 1/6th share in the business. C brings in Rs. 10,000 for his capital and Rs. 3,600 for the 1/6th share of goodwill which he acquires 1/24th from A and 1/8th from B. Profits for the first year of the new partnership amount to Rs. 24,000. Pass necessary journal entries in connection with C's admission and apportion the profits between the partners.
Answer 26:
Question 27: X and Y are partners sharing profits in the ratio of 3 : 1. Z is admitted as a partner for which he pays Rs. 30,000 for goodwill in cash. X, Y and Z decided to share the future profits in equal proportion. You are required to pass a single journal entry to give effect to the above arrangement.
Answer 27:
Question 28: Anshul and Parul are partners sharing profits in the ratio of 3 : 2. they admit payal as partner for 1/4th share in profits on 1st april, 2019. Payal brings Rs. 5,00,000 as capital and her share of goodwill by cheque. it was agreed to value goodwill at three years' purchase of average profit of last four years.
Profits for the last four years ended 31st March, were:
2015-16 4,00,000
2016-17 5,00,000
2017-18 6,00,000
2018-19 7,00,000
Additional information:
1.) Closing stock for the year ended 31st march, 2018 was overvalued by Rs. 50,000.
2.) Rs. 1,00,000 should be charged annually to cover management cost.
Pass necessary journal entries on payal's admission.
Answer 28:
Point of Knowledge:-
Calculation of Normal Profit:-
Normal Profit (for 31st March, 2016) = Profit for the year – Annual Charge for Management Cost
= Rs. 4,00,000 – Rs. 1,00,000
= Rs. 3,00,000
Normal Profit (for 31st March, 2017) = Profit for the year – Annual Charge for Management Cost
= Rs. 5,00,000 – Rs. 1,00,000
= Rs. 4,00,000
Normal Profit (for 31st March, 2018) = Profit for the year + Overvalue of Closing Stock – Annual Charge for Management Cost
= Rs. 6,00,000 + Rs. 50,000 – Rs. 1,00,000
= Rs. 4,50,000
Normal Profit (for 31st March, 2018) = Profit for the year - Overvalue of Opening Stock – Annual Charge for Management Cost
= Rs. 7,00,000 - Rs. 50,000 – Rs. 1,00,000
= Rs. 6,50,000
Calculation of Average Profit = (Normal Profit/No.of Year's
= 3,00,000 + 4,00,000+ 4,50,000+ 6,50,000/4
= 18,00,000/4
= Rs. 4,50,000
Goodwill = Average Profit × No. of Year of Purchases
= Rs. 4,50,000 × 3
= Rs. 13,50,000
Question 29: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2 . They admit C into partnership for 1/5th share. C brings in Rs. 30,000 as capital and Rs. 10,000 as goodwill. At the time of admission of C, goodwill appears in the Balance Sheet of A and Bat Rs. 3,000 . The new profit-sharing ratio of the partners will be 5 : 3 : 2 . Pass necessary journal entries.
Answer 29:
Question 30: Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at Rs 4,40,000. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was 2 : 2 : 1.
Raja brought Rs 1,00,000 for his capital and necessary cash for his goodwill premium. The goodwill of the firm was valued at Rs 2,50,000.
Record necessary journal entries in the books of the firm for the above transactions.
Answer 30:
Premium for Goodwill Brought in Kind
Question 31: X and Y are partners in a firm sharing profits in the ratio of 3 : 2 . On 1st April, 2018, they admit Z as a new partner for 1/4th share in the profits . Z contributed following assets towards his capital and for his share of goodwill:
Stock Rs 60,000 ; Debtors Rs 80,000; Land Rs 1,00,000 , Plant and Machinery Rs 40,000. On the date of admission of Z , the goodwill of the firm was valued at Rs 6,00,000.
Pass necessary journal entries in the books of the firm on Z's admission.
Answer 31:
When Premium for Goodwill is brought in by New or Incoming Partner and is withdrawn by Old Partners Fully or Partly
Question 32: A and B are partners in a business sharing profits and losses in the ratio of 1/3rd and 2/3rd. On 1st April, 2018, their capitals are Rs. 8,000 and Rs. 10,000 respectively. On that date, they admit C in partnership and give him 1/4th share in the future profits. C brings in Rs. 8,000 as his capital and Rs. 6,000 as goodwill. The amount of goodwill is immediately withdrawn by the old partners in cash. Draft the journal entries and show the Capital Accounts of all the Partners. Calculate proportion in which partners would share profits and losses in future.
Answer 32:
Question 33: A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2 . They admitted C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2:2:3. C brought Rs. 2,00,000 as his capital and Rs. 1,50,000 as premium for goodwill. Half of their share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary journal entries for the above transactions in the books of the firm.
Answer 33:
When Only Part of Premium for Goodwill is brought by New Partner in Cash
Question 34: A and B are partners sharing profits in the ratio of 2 : 1 . They admit C for 1/4th share in profits. C brings in Rs. 30,000 for his capital and Rs. 8,000 out of his share Rs. 10,000 for goodwill. Before admission, goodwill appeared in books at Rs. 18,000 .Give journal entries to give effect to the above arrangements.
Answer 34:
Question 35: A and B are partners sharing profits in the ratio of 3 : 2 . They admit C into the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of firm's goodwill. Goodwill of the firm has been valued at Rs 1,00,000. Pass necessary journal entries to record this arrangement.
Answer 35:
When New Partner is not able to bring his Share of Premium for Goodwill
Question 36: On the admission of Rao, it was agreed that the goodwill of Murty and Shah should be valued at Rs 30,000. Rao is to get 1/4th share of profits. Previously Murty and Shah shared profits in the ratio of 3 : 2 . Rao cannot bring in any cash. Give journal entries in the books of Murty and Shah when:
(a) there is no Goodwill A/c and (b) Goodwill appears in the books at Rs 10,000.
Answer 36:
Question 37: A and B are partners sharing profits in the ratio of 3 : 2. Their books show goodwill at Rs 2,000. C is admitted with 1/4th share of profits and brings in Rs. 10,000 as his capital but is not able to bring in cash for his share of goodwill Rs. 3,000. Draft journal entries.
Answer 37:
Question 38: A, B and C are in partnership sharing profits and losses in the ratio of 5 : 4 : 1 respectively. Two new partners D and E are admitted. The profits are now to be shared in the ratio of 3 : 4 : 2 : 2 : 1 respectively. D is to pay Rs. 90,000 for his share of Goodwill but E has insufficient cash to pay for Goodwill. Both the new partners introduced Rs. 1,20,000 each as their capital. You are required to pass necessary journal entries.
Answer 38:
Question 39: Mohan and Sohan were partners in a firm sharing profits and losses in the ratio of 3 : 2 . They admitted Ram for 1/4th share on 1st April, 2018. It was agreed that goodwill of the firm will be valued at 3 years' purchase of the average profit of last 4 years which were Rs. 50,000 for 2014-15, Rs. 60,000 for 2015-16, Rs. 90,000 for 2016-17 and Rs 70,000 for 2017-18. Ram did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram's admission when:
(a) Goodwill appears in the books at Rs 2,02,500.
(b) Goodwill appears in the books at Rs 2,500.
(c) Goodwill appears in the books at Rs 2,02,000.
Answer 39:
Question 40: Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill of the firm was valued at Rs. 5,50,000. Goodwill existed in the books of account at Rs. 1,00,000, Which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary journal entries on admission of sooraj, if:
(a) Goodwill is not to be raised and written off; and
(b) Goodwill is to be raised and written off.
Answer 40:
Hidden Goodwill
Question 41: Anil and Sunil are partners in a firm with fixed capitals of Rs 3,20,000 and Rs 2,40,000 respectively. They admitted Charu as a new partner for 1/4th share in the profits of the firm on 1st April, 2012. Charu brought Rs 3,20,000 as her share of capital.
Calculate value of goodwill and record necessary journal entries.
Answer 41:
Question 42: A and B are partners in a firm with capital of Rs. 60,000 and Rs. 1,20,000 respectively. They decide to admit C into the partnership for 1/4th share in the future profits. C is to bring in a sum of Rs. 70,000 as his capital. Calculate amount of goodwill.
Answer 42:
Question 43: Bhuwan and Shivam were partners in a firm sharing profits in the ratio of 3 : 2. Their capitals were Rs 50,000 and Rs 75,000 respectively. They admitted Atul on 1st April, 2018 as a new partner for 1/4th share in the future profits. Atul brought Rs 75,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Atul's admission.
Answer 43:
The journal entries are as follows:
Question 44: Vinay and Naman are partners sharing profit in the ratio of 4:1. Their capitals were Rs. 90,000 and Rs. 70,000 respectively. They admitted Prateek for 1/3 share in the profit. Prateek brought Rs. 1,00,000 as his capital. Calculate the value of firm’s goodwill.
Answer 44:
Question 45: X and Y are partners with capitals of Rs. 50,000 each. They admit Z as a partner with 1/4th share in the profits of the firm. Z brings in Rs. 80,000 as his share of capital. The Profit and Loss A/c showed a credit balance of Rs. 40,000 as on date of admission of Z.
Give necessary journal entries to record the goodwill.
Answer 45:
Question 46: Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings Rs. 5,00,000 as his share of capital. The value of the total assets of the firm was Rs. 15,00,000 and outside liabilities were valued at Rs. 5,00,000 on that date . Give necessary journal entry to record goodwill at the time of Ajay's admission. Also show your workings.
Answer 46:
Miscellaneous
Question 47: Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in Rs. 20,000 as capital and Rs. 4,000 as his share of goodwill premium. Give the necessary journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.
Answer 47:
Question 48: Disha and Divya are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital of Disha is Rs 4,80,000 and of Divya is Rs 3,00,000. On 1st April, 2019 they admitted Hina as a new partner for 1/5th share in future profits . Hina brought Rs 3,00,000 as her capital . Calculate value of goodwill of the firm and record necessary journal entries on Hina's admission.
Answer 48:
Question 49: E and F were partners in a firm sharing profits in the ratio of 3 : 1. They admitted G as a new partner on 1st April, 2018 for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought Rs. 50,000 in cash and machinery worth Rs. 70,000 for his share of profit as premium of goodwill. Pass necessary journal entries in the books of the firm.
Answer 49:
Question 50: Mr. A commenced business with a capital of Rs. 2,50,000 on 1st April, 2013. During the five years ended 31st March, 2018, the following profits and losses were made:
31st March, 2014——Loss Rs. 5,000
31st March, 2015——Profit Rs. 13,000
31st March, 2016——Profit Rs. 17,000
31st March, 2017——Profit Rs. 20,000
31st March, 2018——Profit Rs. 25,000
During this period he had drawn Rs. 40,000 for his personal use . On 1st April , 2018, he admitted B into partnership on the following terms:
B to bring for his half share in the business , capital equal to A's Capital on 31st March, 2018 and to pay for the one-half share of goodwill of the business, on the basis of three times the average profit of the last five years . Prepare the statement showing what amount B should invest to become a partner and pass entries to record the transactions relating to admission.
Answer 50:
Revaluation of assets and Reassement of liabilities
Question 51: Pass entries in the firm's journal for the following on admission of a partner:
(i) Machinery be depreciated by Rs. 16,000 and Building be appreciated by Rs. 40,000.
(ii) A provision be created for Doubtful Debts @ 5% of Debtors amounting to Rs. 80,000.
(iii) Provision for warranty claims be increased by Rs. 12,000.
Answer 51:
Question 52: Pass entries in the firm's journal for the following on admission of a partner:
(i) Unrecorded Investments worth Rs. 20,000.
(ii) Unrecorded liability towards suppliers for Rs. 5,000.
(iii) An item of Rs. 1,600 included in Sundry Creditors is not likely to be claimed and hence should be written back.
Answer 52:
Question 53: X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a new partner and fixed the new profit-sharing ratio as 3 : 2 : 1. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at Rs. 50,000 and Rs. 5,000 respectively all debtors are good. Pass the necessary journal entries.
Answer 53:
Question 54: X and Y are partners in a firm sharing profits in the ratio of 3 : 2 . They admitted Z as a new partner for 1/4th share. At the time of admission of Z, Stock (Book Value Rs. 1,00,000) is to be reduced by 40% and Furniture (Book Value Rs. 60,000) is to be reduced to 40%. Pass the necessary journal entries.
Answer 51:
Question 55: X and Y are partners sharing profits in the ratio of 3 : 2. They admitted Z as a new partner for 1/4th share of profits. At the time of admission of Z, Investments appeared at Rs. 80,000. Half of the investments to be taken over by X and Y in their profit-sharing ratio at book value. Remaining investments were valued at Rs 50,000. Pass the necessary journal entries.
Answer 55:
Question 56: X and Y are partners sharing profits in the ratio of 3 : 2. They admitted Z as a new partner for 1/4th share of profits. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at Rs. 76,000 and Rs. 8,000 respectively. Rs. 6,000 of the debtors proved bad. A provision of 5% is to be created on Sundry Debtors for doubtful debts. Pass the necessary journal entries.
Answer 56:
Question 57: X, Y and Z are partners sharing profits ands losses in the ratio of 6 : 3 : 1 . They decide to take W into partnership with effect from 1st April, 2018. The new profit-sharing ratio between X, Y , Z and W will be 3 : 3 : 3 : 1 . They also decide to record the effect of the following revaluations without affecting the book values of the assets and liabilities by passing a single adjustment entry:
Pass necessary adjustment entry.
Answer 57:
Question 58: At the time of admission of a new partner C, the assets and liabilities of A and B were revalued as follows:
(a) A Provision for Doubtful Debts @10% was made on Sundry Debtors (Sundry Debtors Rs. 50,000).
(b) Creditors were written back by Rs. 5,000.
(c) Building was appreciated by 20% (Book Value of Building Rs. 2,00,000).
(d) Unrecorded Investments were worth Rs. 15,000.
(e) A Provision of Rs 2,000 was made for an Outstanding Bill for repairs.
(f) Unrecorded Liability towards suppliers was Rs. 3,000.
Pass necessary journal entries.
Answer 55:
Question 59: X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 . On 1st April, 2018, they admit Z as a new partner for 1/5th share in profits. On that date, there was a balance of Rs. 1,50,000 in General Reserve and a debit balance of Rs. 20,000 in the Profit and Loss A/c of the firm. Pass necessary journal entries regarding adjustment of reserve and accumulated profit/loss.
Answer 59:
Question 60: X and Y were partners in a firm sharing profits and losses in the ratio of 2 : 1 . Z was admitted for 1/3rd share in the profits. On the date of Z's admission, the Balance Sheet of X and Y showed General Reserve of Rs. 2,50,000 and a credit balance of Rs. 50,000 in Profit and Loss A/c . Pass necessary journal entries on the treatment of these items on Z's admission.
Answer 60:
Question 61: (a) X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 . They decide to admit W for 1/6th share . Following is th extract of the Balance Sheet on the date of admission:
(b) A and B were partners in a firm sharing profit in 4 : 3 ratio. On 1st April, 2018, they admitted C as a new partner. On the date of C's admission, the Balance Sheet of A and B showed a General Reserve of Rs. 84,000 and a debit balance of Rs. 8,400 in the 'Profit and Loss A/c'. Pass necessary journal entries for the treatment of these items on C's admission.
(c) Give the journal entries to distribute 'Workmen Compensation Reserve' of Rs. 72,000 at the time of admission of Z, when there is no claim against it. The firm has two partners X and Y.
(d) Give the journal entries to distribute 'Workmen Compensation Reserve' of Rs. 72,000 at the time of admission of Z , when there is claim of Rs. 48,000 against it . The firm has two partners X and Y.
(e) Give the journal entry to distribute 'Investment Fluctuation Reserve' of Rs. 24,000 at the time of admission of Z, when Investment (Market Value Rs. 1,10,000 ) appears at Rs. 1,20,000. The firm has two partners X and Y.
(f) Give the journal entry to distribute 'General Reserve' of Rs 4,800 at the time of admission of Z , when 20% of General Reserve is to be transferred to Investment Fluctuation Reserve . The firm has two partners X and Y.
(g) A, B and C were partners sharing profits and losses in the ratio of 6 : 3 : 1 . They decide to take D into partnership with effect from 1st April, 2018. The new profit-sharing ratio between A, B , C and D will be 3 : 3 : 3 : 1 . They also decide to record the effect of the following without affecting their book values, by passing a single adjustment entry:
Pass the necessary single adjustment entry, through the Partner's Current A/c.
Answer 61:
Question 62: X,Y, and Z are equal partners with capital of Rs. 1500; Rs. 1,750 and Rs. 2,000 respectively. They agree to admit W into equal partnership upon payment in cash Rs. 1,500 for 1/4th share of the goodwill and Rs. 1,800 as his capital, both sums to remain in the business. The liabilities of the old firm amounted to Rs. 3,000 and the assets, apart from cash, consist of Motors Rs. 1,200, Furniture Rs. 400. Stock Rs. 2,650 and Debtors Rs. 3,780. The Motors and Furniture were revalued at Rs. 950 and Rs. 380 respectively.
Answer 62:
Question 63: A and B, carrying on business in partnership and sharing profits and losses in the ratio of 3 : 2 , require a partner, when their Balance Sheet stood as:
They admit C into partnership and give him 1/8th share in the future profits on the following terms: (a) Goodwill of the firm be valued at twice the average of the last three years' profits which amounted to Rs. 21,000; Rs. 24,000 and Rs. 25,560.
(b) C is to bring in cash for the amount of his share of goodwill.
(c) C is to bring in cash Rs 15,000 as his capital.
Pass journal entries recording these transactions, draw out the Balance Sheet of the new firm and state new profit-sharing ratio.
Answer 63:
Question 64: Following was the Balance Sheet of A and B who were sharing profits in the ratio 2 : 1 as at 31st March, 2019:
They agree to admit C into the partnership on the following terms:
(a) C was to bring in Rs. 7,500 as his capital and Rs. 3,000 as goodwill for 1/4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5% .
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtor Rs 375.
(d) Building A/c was to be appreciated by 10%.
Pass necessary journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment A/c (or Revaluation A/c), Capital A/c’s and Balance Sheet of the new firm.
Answer 64:
Question 65: Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31st March, 2018. A and B share profits and losses in the ratio of 2 : 1.
C is admitted as a partner on the date of the Balance Sheet on the following terms:
(a) C will bring in Rs 1,00,000 as his capital and Rs 60,000 as his share of goodwill for 1/4th share in the profits .
(b) Plant is to be appreciated to Rs 1,20,000 and the value of building is to be appreciated by 10%.
(c) Stock is found overvalued by Rs 4,000.
(d) A Provision for doubtful debts is to be created at 5% of Sundry Debtors.
(e) Creditors were unrecorded to the extent of Rs 1,000.
Pass the necessary journal entries, prepare the Revaluation A/c and Partners' Capital A/cs, and show the Balance Sheet after the admission of C.
Answer 65:
Question 66: Balance Sheet of J and K who share profits in the ratio of 3 : 2 is as follows:
M joins the firm from 1st April, 2018 for a half share in the future profits. He is to pay Rs 1,00,000 for goodwill and Rs 3,00,000 for capital. Draft the journal entries and prepare Balance Sheet in each of the following cases:
(a) If M acquires his share of profit from the firm in the profit -sharing ratios of the partners.
(b) If M acquires his share of profits from the firm in equal proportions from the original partners .
(c) If M acquires his share of profit in the ratio of 3 : 1 from the original partners, ascertain the future profit-sharing ratio of the partners in each case.
Answer 66:
(a) If M acquires his share of profit from the firm in the original ratios of the partners.
Question 67: The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of 2 : 3 as at 31st March, 2016 is given below:
Madhu and Vidhi decided to admit Gayatri as a new partner from 1st April, 2016 and their new profit-sharing ratio will be 2 : 3 : 5 . Gayatri brought Rs 4,00,000 as her capital and her share of goodwill premium in cash.
(a) Goodwill of the firm was valued at Rs 3,00,000.
(b) Land and Building was found undervalued by Rs 26,000.
(c) Provision for doubtful debts was to be made equal to 5% of the debtors .
(d) There was a claim of Rs 6,000 on A/c of workmen compensation.
Prepare Revaluation A/c , Partners' Capital A/cs and the Balance Sheet of the reconstituted firm .
Answer 67:
Question 68: Shyamlal and Sanjay were in partnership business sharing profits and losses in the ratio of 2 : 3 respectively. Their Balance Sheet as at 31st March, 2019 was:
On 1st April, 2018, they admitted Shanker into partnership for 1/3rd share in the future profits on the following terms:
(a) Shanker is to bring in Rs 30,000 as his capital and Rs 20,000 as goodwill which is to remain in the business.
(b) Stock and Furniture are to be reduced in value by 10%.
(c) Building is to be appreciated by Rs 15,000.
(d) Provision of 5% is to be made on Sundry Debtors for Doubtful Debts .
(e) Unaccounted Accrued Income of Rs 2,400 to be provided for . A debtor , whose dues of Rs 4,800 were written off as bad debts , paid 50% in full settlement .
(f) Outstanding Rent amounted to Rs 4,800.
Show Profit and Loss Adjustment A/c (Revaluation A/c) , Capital A/cs of Partners and opening Balance Sheet of the new firm.
Answer 68:
Question 69: A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as at 31st March , 2108 is as follows:
D is admitted as a new partner on 1st April, 2018 for an equal share and is to pay Rs. 50,000 as capital.
Following are the adjustments required on D's admission:
(a) Out of the Creditors, a sum of Rs. 10,000 is due to D which will be transferred to his capital A/c.
(b) Advertisement Expenses of Rs. 1,200 are to be carried forward to next Accounting period as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss A/c includes a sum of Rs. 2,000 paid for B's personal expenses.
(d) A Bill of Exchange of Rs 4,000, which was previously discounted with the banker, was dishonoured on 31st March, 2018 but no entry has been passed for that.
(e) A Provision for Doubtful Debts @ 5% is to be created against Debtors.
(f) Expenses on Revaluation amounted to Rs. 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D's admission.
Answer 69:
Question 70: On 31st March, 2017, the Balance Sheet of Abhir and Divya, who were sharing profits in the ratio of 3 : 1 was as follows:
They decided to admit Vibhor on 1st April, 2017 for 1/5th share.
(a) Vibhor shall bring Rs. 80,000 as his share of goodwill premium.
(b) Stock was overvalued by Rs. 20,000.
(c) A debtor whose dues of Rs. 5,000 were written off as bad debts, paid Rs. 4,000 in full settlement.
(d) Two months' salary @ Rs. 6,000 per month was outstanding.
(e) Vibhor was to bring in Capital to the extent of 1/5th of the total capital of the new firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
Answer 70:
Question 71: X and Y share profits in the ratio of 5 : 3 . Their Balance Sheet as at 31st March, 2019 was:
They admit Z into partnership with 1/8th share in profits on this date. Z brings Rs. 20,000 as his capital and Rs. 12,000 for goodwill in cash. Z acquires his share entirely from X. Following revaluations are also made:
(a) Employees' Provident Fund liability is to be increased by Rs. 5,000.
(b) All Debtors are good. Therefore, no provision is required on Debtors.
(c) Stock includes Rs. 3,000 for obsolete items.
(d) Creditors are to be paid Rs. 1,000 more.
(e) Fixed Assets are to be revalued at Rs. 70,000.
Prepare journal entries, necessary Accounts and new Balance Sheet. Also, calculate new profit-sharing ratio.
Answer 71:
Question 72: X and Y are partners in a firm sharing profits in the ratio of 3 : 2 . Their Balance Sheet as at 31st March , 2019 was as follows:
On 1st April, 2019, they admitted Z as a partner for 1/6th share on the following terms:
(i) Z brings in Rs. 40,000 as his share of Capital but he is unable to bring any amount for Goodwill.
(ii) Claim on Account of Workmen Compensation is Rs. 3,000.
(iii) To write off Bad Debts amounted to Rs. 6,000.
(iv) Creditors are to be paid Rs. 2,000 more.
(v) There being a claim against the firm for damages, liabilities to the extent of Rs. 2,000 should be created.
(vi) Outstanding rent be brought down to Rs. 11,200.
(vii) Goodwill is valued at 112/112 years' purchase of the average profits of last 3 years, less Rs. 12,000. Profits for the last 3 years amounted to Rs. 10,000; Rs. 20,000 and Rs. 30,000.
Pass journal entries; prepare Capital account and opening Balance Sheet.
Answer 72:
Question 73: Rajesh and Ravi are partners sharing profits in the ratio of 3: 2 . Their Balance Sheet at 31st March, 2019 stood as:
Raman is admitted as a new partner introducing a capital of Rs. 16,000. The new profit-sharing ratio is decided as 5 : 3 : 2 . Raman is unable to bring in any cash for goodwill. So it is decided to value the goodwill on the basis of Raman's share in the profits and the capital contributed by him. Following revaluations are made.
(a) Stock to depreciate by 5% ;
(b) Provision for Doubtful Debts is to be Rs. 500;
(c) Furniture to depreciate by 10%;
(d) Building is valued at Rs. 40,000.
Show necessary Ledger A/cs and Balance Sheet of new firm.
Answer 73:
Question 74: A and B are partners in a firm sharing profits in the ratio of 3 : 2 . They admit C as a partner on 1st April, 2018 on which date the Balance Sheet of the firm was:
You are required to prepare the Revaluation A/c , Partners' Capital Account and Balance Sheet of the new firm after considering the following;
(a) C brings in Rs 30,000 as capital for 1/4th share. He also brings Rs 10,000 for his share of goodwill.
(b) Part of the Stock which had been included at cost of Rs 2,000 had been badly damaged in storage and could only expect to realise Rs 400.
(c) Bank Charges had been overlooked and amounted to Rs 200 for the year 2017-18.
(d) Depreciation on Building of Rs 3,000 had been omitted for the year 2017-18.
(e) A credit for goods for Rs 800 had been omitted from both purchases and creditors although the goods had been correctly included in Stock.
(f) An expense of Rs 1,200 for insurance premium was debited in the Profit and Loss A/c of 2017-18 but Rs 600 of this are related to the period after 31st March, 2018.
Answer 74:
Question 75: Divya, Yasmin and Fatima are partners in a firm, sharing profits and losses in 11 : 7 : 2 respectively. The Balance Sheet of the firm 31st March, 2018 was as follows:
On 1st April, 2018, Aditya is admitted as a partner for one-fifth share in the profits with a capital of 4,50,000 and necessary amount for his share of goodwill on the following terms:
a.) Furniture of Rs. 2,40,000 were to be taken over Divya, Yasmin and Fatima equally.
b.) A creditor of Rs. 7,000 not recorded in books to be taken into account.
c.) Goodwill of the firm is to be valued at 2.5 years' purchase of average profits of last two years. The profits of the last three years were:
2015-16– Rs. 6,00,000; 2016-17 – Rs. 2,00,000; 2017-18 – Rs. 6,00,000.
d.) At time of Aditya's admission. Yasmin also brought in Rs. 50,000 as fresh capital.
e.) Plant and Machinery is re-valued to Rs. 2,00,000 and expenses outstanding were brought down to Rs. 9,000.
Prepare Revaluation Account, Partners Capital Account and the Balance Sheet of the reconstituted firm.
Answer 75:
Question 76: A and B are partners in a firm. The net profit of the firm is divided as follows: 1/2 to A, 1/3 to B and 1/6 carried to a Reserve. They admit C as a partner on 1st April, 2018 on which date, the Balance Sheet of the firm was:
Following are the required adjustments on admission of C:
(a) C brings in Rs 25,000 towards his capital.
(b) C also brings in Rs 5,000 for 1/5th share of goodwill.
(c) Stock is undervalued by 10%.
(d) Creditors include a contingent liability of Rs 4,000, which has been decided by the court at Rs 3,200.
(e) In regard to the Debtors, the following Debts proved Bad or Doubtful Rs 2,000 due from X bad to the full extent; Rs 4,000 due from Y insolvent , estate expected to pay only 50%.
You are required to prepare Revaluation A/c, Partners' Capital A/cs and Balance Sheet of the new firm.
Answer 76:
Question 77: Following is the Balance Sheet of the firm, Ashirvad, owned by A , B and C who share profits and losses of the business in the ratio of 3 : 2 :1.
On 1st April, 2018, they admit D as a partner on the following conditions :
(a) D will bring in Rs 1,20,000 as his capital and also Rs 30,000 as goodwill premium for a quarter of the share in the future profits / losses of the firm.
(b) The values of the fixed assets of the firm will be increased by 10% before the admission of D .
(c) Mohan, an old customer whose A/c was written off as bad debts, has promised to pay Rs 3,000 in full settlement of his dues.
(d) The future profits and losses of the firm will be shared equally by all the partners.
Pass the necessary journal entries and Prepare Revaluation A/c, Partners' Capital A/cs and opening Balance Sheet of the new firm
Note: There will be no entry for the promise made by Mohan, since it is an event and not a transaction. There is another view, Rs 3,000 is to be considered as bad debts recovered . In this situation result will be as follows :
Gain( Profit) on Revaluation——Rs 36,000; Capital A/cs: A——Rs 1,66,000; B——Rs 1,42,000; C——Rs 1,16,000; D's Capital——Rs 1,20,000; Balance Sheet Total——Rs 5,72,000.
Answer 77:
Question 78: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2 . Following is their Balance Sheet as at 31st March, 2018:
C is admitted as a partner on 1st April, 2018 on the following terms:
(a) C is to pay Rs 20,000 as capital for 1/4th share. He also pays Rs 5,000 as premium for goodwill.
(b) Debtors amounted to Rs 3,000 is to be written off as bad and a Provision of 10% is created against Doubtful Debts on the remaining amount.
(c) No entry has been passed in respect of a debt of Rs 300 recovered by A from a customer , which was previously written off as bad in previous year . The amount is to be paid by A.
(d) Investments are taken over by B at their market value of Rs 4,900 against cash payment .
You are required to prepare Revaluation A/c, Partner's Capital A/cs and new Balance Sheet
Answer 78:
Question 79: X and Y are partners sharing profits and losses in the ratio of 3/4 and 1/4. Their Balance Sheet as at 31st March, 2018 is:
They admit Z into partnership on 1st April, 2018 on the following terms:
(a) Goodwill is to be valued at Rs 1,00,000.
(b) Stock and Furniture to be reduced by 10%.
(c) A Provision for Doubtful Debts is to be created @ 5% on Sundry Debtors .
(d) The value of Land and Building is to be appreciated by 20%.
(e) Z pays Rs 50,000 as his capital for 1/5th share in the future profits.
You are required to show Revaluation A/c , Partners' Capital A/cs and Balance Sheet of the new firm.
Note: Z's Share of Goodwill Rs 20,000 (i.e, Rs 1,00,000 × × 1/5 ) can be adjusted through Z's Current A/c. In that situation, Partners' Capital A/cs: X——Rs 1,87,875; Y——Rs 92,625; Z——Rs 50,000; Z's Current A/c (Dr.)——Rs 20,000; Balance Sheet Total——Rs 5,18,000.
Answer 79:
Question 80: Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2 . On 31st March,2018 their Balance Sheet was:
On the above date , the partners decided to admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika , Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in Rs 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners' therefore, decide to calculate the goodwill on the basis of Anshu's share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at Rs 60,000, Stock at Rs 40,000 and the Provision for Doubtful Debts is to be maintained at Rs 4,000. Value of Land and Building has appreciated by 20%. Furniture has been depreciated by 10%.
(e) There is and additional liability of Rs 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of A/c of the reconstituted firm.
Prepare Revaluation A/c , Partners' Capital Accounts and Balance Sheet of Deepika , Rajshree and Anshu.
Answer 80:
Question 81: Atul and Amit are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 is as follows:
Abhay is admitted as a partner for 1/4th share on 1st April, 2019 on the following terms:
(a) Abhay is to bring Rs. 65,000 as capital after adjusting amount due to him included in creditors and his share of Goodwill.
(b) Rs. 10,000 included in creditors is payable to Abhay which is to be transferred to his Capital Account.
(c) Furniture is to reduce by Rs. 3,000 and Plant and Machinery is to be increased to Rs. 1,98,000.
(d) Stock is overvalued by Rs. 4,000.
(e) A Provision for Doubtful Debts is to be created @ 5%.
(f) Goodwill is to be valued at 2 years' purchase of average profit for four years. Profits of four years ended 31st March were as follows: 2018-19 – Rs. 25,000, 2017-18 – Rs. 10,000, 2016-17 – Rs. 2,500, and 2015-16 – Rs. 2,500.
Pass the Journal entries for the above arrangement.
Answer 81:
Question 82: Yogesh and Naresh are partners sharing profits in the ratio of 3 : 2. They admit Ramesh for 1/3rd share on 1st April, 2019 and also decide to share future profits equally. Balance sheet of the firm as at 31st March, 2019 was as follows:
They admitted Ramesh on the following terms:
A.) He will bring Rs. 5,00,000 as his capital.
B.) His share of goodwill is valued at Rs. 1,00,000 but he is unable to bring cash for his share of goodwill. It is agreed to debit the amount to his current account.
C.) Value of land and building is to be appreciated by Rs. 40,000 each.
D.) Value of furniture to be reduced to Rs. 40,000.
E.) Provision for doubtful debts to be increased to 10%.
F.) A liability for damages of Rs. 10,000 is to be created.
Pass the journal entries on admission of Ramesh and prepare revaluation account.
Answer 81:
Question 83: Balance Sheet of Ram and Shyam who shares profits in the ratio of their capitals as at 31st March, 2019 is:
On 1st April, 2019, they admitted Arjun into partnership on the following terms:
a.) Arjun to bring Rs. 20,000 as capital and Rs. 6,600 for goodwill, which is to be left in the business and he is to receive 1/4th share of the profits.
b.) Provision for Doubtful Debts is to be 2% on Debtors.
c.) Value of Stock to be written down by 5% .
d.) Freehold Premises are to be taken at a value of Rs. 22,400; Plant and Machinery Rs. 11,800; Fixtures and Fittings Rs. 1,540 and Vehicles Rs. 800.
You are required to make necessary adjustments entries in the firm, give Balance Sheet of the new firm as at 1st April, 2019 and also determine the ratio in which the partners will share profits, there being no change in the ratio of Ram and Shyam.
Answer 83:
Question 84: Following is the Balance Sheet of X and Y as at 31st March, 2019 who are partners in a firm sharing profits and losses in the ratio of 3 : 2 respectively:
Z is admitted as a new partner on 1st April, 2019 on the following terms:
a.) Provision for doubtful debts is to be maintained at 5% on Debtors.
b.) Outstanding rent amounted to Rs. 15,000.
c.) An accrued income of Rs. 4,500 does not appear in the books of the firm. It is now to be recorded.
d.) X takes over the Investments at an agreed value of Rs. 18,000.
e.) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
f.) Z will bring in Rs. 60,000 as his capital by cheque.
g.) Z is to pay an amount equal to his share in firm's goodwill valued at twice the average profit of the last three years which were Rs. 90,000; Rs. 78,000 and Rs. 75,000 respectively.
h.) Half of the amount of goodwill is to be withdrawn by X and Y.
You are required to pass Journal entries, prepare Revaluation Account, Partners' Capital and Current Accounts and the Balance Sheet of the new firm.
Answer 84:
Question 85: X and Y are partners sharing profits equally. Their Balance Sheet as on 31st March, 2019 is given below:
Z is admitted as a new partner for 1/4th share under the following terms:
a.) Z is to introduce Rs. 1,25,000 as capital.
b.) Goodwill of the firm was valued at nil.
c.) It is found that the creditors included a sum of Rs. 7,500 which was not to be paid. But it was also found that there was a liability for Compensation to Workmen amounting to Rs. 10,000.
d.) Provision for doubtful debts is to be created @ 10% on debtors.
e.) In regard to the Partners' Capital Accounts, present Fixed Capital Account Method is to be converted into Fluctuating Capital Account Method.
f.) Bills of Rs. 20,000 accepted from creditors were not recorded in the books.
g.) X provides Rs. 50,000 loan to the business carrying interest @ 10% p.a.
You are required to prepare Revaluation Account, Partners' Capital Accounts, Bank Account and the Balance Sheet of the new firm.
Answer 85:
Question 86: X and Y are partners sharing profits in the ratio of 2 : 1 . Their Balance Sheet as at 31st March, 2018 was:
They admit Z into partnership on the same date on the following terms;
(a) Z brings in Rs 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in Rs 15,000 for goodwill, half of which is withdrawn by old partners .
(c) Investments are valued at Rs 10,000 . X takes over Investments at this value.
(d) Typewriter is to be depreciated by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on 31st March,2018 is Rs 1,000.
(f) By bringing in r withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass journal entries, prepare Revaluation A/c, Capital A/c’s and new Balance Sheet of the firm.
Answer 86:
Question 87: A and B are in partnership sharing profits and losses in the proportion of 2/3rd and 1/3rd respectively. Their Balance Sheet as at 31st March, 2018 was: Cash Rs. 1,000; Sundry Debtors Rs. 15,000; Stock Rs. 22,000; Plant and Machinery Rs. 4,000; Sundry Creditors Rs. 2,000; Bank Overdraft Rs. 15,000; A's Capital Rs. 15,000; B's Capital Rs. 10,000. On 1st April, 2018 they admitted into partnership on the following terms:
(a) C to purchase one-quarter of the goodwill for Rs. 3,000 and provide Rs 10,000 as capital. C brings in necessary cash for goodwill and capital.
(b) Profits and Losses are to be shared in the proportion of one-half to A , one-quarter to B and one quarter to C .
(c) Plant and Machinery is to be reduced by 10% and Rs 500 are to be provided for estimated Bad Debts. Stock is to be taken at a valuation of Rs 24,940.
(d) By bringing in or withdrawing cash the capitals of A and B are to be made proportionate to that of C on their profit-sharing basis. Prepare necessary Ledger A/cs in the books of the firm relating to the above arrangement and submit the opening Balance Sheet of the new firm.
Answer 87:
Question 88: A and B were partners in a firm sharing profits in 3 : 1 ratio. They admitted C as a partner for 1/4th share in the future profit. C was to bring Rs 60,000 for his capital. The Balance Sheet of A and B as at 1st April,2018, the date on which C was admitted , was:
The other terms agreed upon were:
(a) Goodwill of the firm was valued at Rs 24,000.
(b) Land and Building were valued at Rs 65,000 and Plant and Machinery at Rs 60,000.
(c) Provision for Doubtful Debts was found in excess by Rs 400.
(d) A liability of Rs 1,200 included in Sundry Creditors was not likely to arise.
(e) The capitals of the partners be adjusted on the basis of C's contribution of capital to the firm.
(f) Excess of shortfall, if any, be transferred to Current A/cs.
Prepare Revaluation A/c , Partners' Capital A/cs and Balance Sheet of the new firm.
Answer 88:
Note 2: Treatment of Goodwill:
Goodwill of the firm was valued at 24,000
C’s share of Goodwill = 24,000 × ¼ = 6,000
C does not brings his share of goodwill in cash and it is a case of capital adjustment. So we can
transfer C’s share of Goodwill to C’s Current A/c.
Note 3: Calculation of Capital
Total capital of the new firm according to new partner or C’s capital contribution
= 60,000 × 4/1 = 2,40,000
A’s New Capital = 2,40,000 × 9/16 = 1,35,000
B’s New Capital = 2,40,000 × 3/16 = 45,000
C’s New Capital = 2,40,000 × 4/16 = 60,000
Question 89: The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 ; 1 , as o 1st April, 2018 is as follows:
On the above date, W is admitted as a partner on the following terms:
(a) W will bring Rs. 50,000 as his capital and get 1/6th share in the profits.
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at Rs. 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of Rs. 7,004 will be created against bills receivable discounted earlier but now dishonoured.
(e) The value of stock, furniture and investments is reduced by 20% , whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital A/cs of the partners will be adjusted on the basis of W's Capital through their Current A/cs.
Prepare Revaluation A/c , Partners' Current A/cs and Capitals A/cs.
Answer 89:
Question 90: Shikhar and Rohit were partners in a firm sharing profits int he 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 Rs 4,30,000 as his capital and Rs 25,000 for his share of goodwill premium . The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows:
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 Rs 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 A/c , Partners' Capital A/cs and Balance Sheet of the new firm.
Answer 90:
Question 91: Raghu and Rishu are partners sharing profits in the ratio 3 : 2 . Their Balance Sheet as at 31st March, 2009 was as follows:
Rishabh was admitted on that date for 1/4th share of profit on the following terms:
(a) Rishabh will bring Rs 50,000 as his share of capital.
(b) Goodwill of the firm is valued at Rs 42,000 and Rishabh will bring his share of goodwill in cash.
(c) Buildings were appreciated by 20%.
(d) All Debtors were good.
(e) There was a liability of Rs 10,800 included in Creditors which was not likely to arise.
(f) New profit-sharing ratio will be 2 : 1 : 1 .
(g) Capital of Raghu and Rishu will be adjusted on the basis of Rishabh's share of capital and any excess or deficiency will be made by withdrawing or bringing in cash by the concerned partners as the case may be .
Prepare Revaluation A/c , Partners' Capital A/cs and Balance Sheet of the new firm.
Answer 91:
When the New Partner is required to bring Proportionate Capital
Question 92: Following is the Balance Sheet of Abha and Binay as at 31st March, 2014:
Chitra was admitted as a partner for 1/4th share in the profits of the firm . It was decided that:
(a) Bad Debts amounted to Rs 1,500 will be written off.
(b) Stock worth Rs 8,000 was taken over by Abha and Binay at Book Value in their profit-sharing ratio. The remaining stock was valued at Rs 2,500.
(c) Plant and Machinery and Goodwill were valued at Rs 32,000 and Rs 20,000 respectively.
(d) Chitra brought her share of goodwill in cash.
(e) Chitra will bring proportionate capital and the capitals of Abha and Binay will be adjusted in their profit-sharing ratio by bringing in or paying off cash as the case may be .
Prepare Revaluation A/c and Partners' Capital A/cs.
Answer 92:
Question 93: Sarthak and Vansh are partners sharing profits in the ratio of 2 : 1. Since both of them are specially abled sometimes they find it difficult to run the business on their own. Mansi, a common friend, decides to help them. Therefore, they admit her into partnership for 1/3rd share in profits. She brings Rs. 60,000 for goodwill and proportionate capital. At the time of admission of Mansi, the Balance Sheet of Sarthak and Vansh was as under:
It was decided to:
a.) Reduce the value of Stock by Rs. 10,000.
b.) Plant is to be valued at Rs. 80,000.
c.) An amount of Rs. 3,000 included in Creditors was not payable.
d.) Half of the investments were taken over by Sarthak and remaining were valued at Rs. 25,000.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of reconstituted firm.
Answer 93:
Question 94: A, B and C are partners sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2019, their Balance Sheet was:
They admit D into partnership on the following terms:
a.) Machinery is to be depreciated by 15%.
b.) Stock is to be revalued at Rs. 48,000.
c.) It is found that the Creditors included a sum of Rs. 12,000 which was not to be paid.
d.) Outstanding Rent is Rs. 1,900.
e.) D is to bring in Rs. 6,000 as goodwill and sufficient capital for 2/5th share.
f.) The partners decided to use 10% of the profits every year in providing drinking water in schools, where required.
Answer 94:
Question 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:
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 Rs. 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.
Answer 95:
Question 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:
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 Rs 1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was Rs 36,000.
(iv) Machinery will be reduced to Rs 58,000.
(v) A creditor of Rs 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 A/c, Partners' Capital A/cs and the Balance Sheet of the new firm.
Answer 96:
Question 97: A and B are partners in a firm sharing profits and losses in the ratio 3 : 1 . They admit C for 1/4th share on 31st March, 2014 when their Balance Sheet was as follows:
The following adjustments were agreed upon:
(a) C brings Rs 16,000 as goodwill and proportionate capital.
(b) Bad Debts amounted to Rs 3,000.
(c) Market value of Investments is Rs 4,500.
(d) Liability on A/c of workmen compensation reserve amounted to Rs 2,000.
Prepare Revaluation A/c and Partners' Capital A/cs.
Answer 97:
Question 98: Pradeep and Dhanraj were partners in a firm sharing profits in the ratio of 3 : 1 . Their Balance Sheet on 31st March, 2018 was:
They admitted Leander as a new partner on this date . New profit-sharing ratio is agreed as 3 : 2 ; 3 . Leander brings in proportionate capital after the following adjustments:
(a) Leander brings Rs 16,000 as his share fo goodwill.
(b) Provisions for Doubtful Debts is to be reduced by Rs 2,000.
(c) There is an old Typewriter valued at Rs 2,400. It does not appear in the books of the firm . It is now to be recorded.
(d) Patents are valueless.
Prepare Revaluation A/c , Capital A/cs and opening Balance Sheet of Pradeep , Dhanraj and Leander.
Answer 98:
Question 99: Mohan and Sohan are in partnership sharing profits in the proportion of 3/5th and 2/5th respectively. Their Balance Sheet as at 31st March, 2018 was:
They decide to admit Rohan to a 1/3rd share upon the terms that he is to pay into the business Rs 1,000 as Goodwill and sufficient Capital to give him a 1/3rd share of the total capital of the new firm. It was agreed that the Provision for Doubtful Debts be reduced to Rs 100 and the Stock be revalued at Rs 2,000 and that the Plant be reduced to Rs 500.
You are required to record the above in the Ledger of the firm and show Balance Sheet of the new partnership.
Answer 99:
Question 100 Following is the Balance Sheet of X and Y as at 31st March, 2018. Z is admitted as a partner on that date when the position of Xand Y was:
X and Y share profits in the proportion of 3 : 2 . The following terms of admission are agreed upon :
(a) Revaluation of assets : Building Rs 18,000; Stock Rs 16,000.
(b) The liability on Workmen Compensation Reserve is determined at Rs 2,000.
(c) Z brought as his share of goodwill Rs 10,000 in cash.
(d) Z was to bring in further cash as would make his capital equal to 20% of the combined capital of X and after above revaluation and adjustments are carried out .
(e) The further profit-sharing proportions were: X——2/5th, Y——2/5th and Z——1/5th.
Prepare new Balance Sheet of the firm and Capital A/cs of the Partners'
Answer 100:
Question 101: Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2 . On 1st April, 2018 , they admitted Karuna as a new partner for 1/5th share in the profits of the firm . The Balance Sheet of the Kalpana and Kanika as on 1st April, 2018 was as follows:
It was agreed that;
(a) the value of Land and Building will be appreciated by 20% .
(b) the value of plant be increased by Rs 60,000.
(c) Karuna will bring Rs 80,000 for her share of goodwill premium.
(d) the liabilities of Workmen's Compensation Fund were determined at Rs 60,000.
(e) Karuna will bring in cash as capital to the extent of 1/5th share of the total capital of the new firm.
Prepare Revaluation A/c, Partners' Capital A/cs and Balance Sheet of the new firm.
Answer 101:
Question 102: A and B are partners sharing profits in the ratio of 3 : 2 . They admit C as a new partner from 1st April, 2018 . They have decided to share future profits in the ratio of 4 : 3 : 3 . The Balance Sheet as at 31st March, 2018 is given below:
Terms of C's admission are as follows:(i) C contributes proportionate capital and 60% of his share of goodwill in cash.(ii) Goodwill is to be valued at 2 years' purchase of super profit of last three completed years. Profits for the years ended 31st March were:2016long dashRs 4,80,000; 2017long dashRs 9,30,000; 2018long dashRs 13,80,000.The normal profit is Rs 5,30,000 with same amount of capital invested in similar industry.(iii) Land and Building was found undervalued by Rs 1,00,000.(iv) Stock was found undervalued by Rs 31,000.(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors(vi) Claim on A/c of Workmen Compensation is Rs 11,000 .Prepare Revaluation A/c , Partners' Capital A/cs and Balance Sheet .
Answer 102:
