B died on 30th June, 2016 and according to the deed Of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest thereon @ 10% p.a
(b) His proportionate share of General Reserve.
(c) His share of profits for the intervening period will be based on the sales during that period. Sale
from 1st April, 2016 to-30th June, 2016 were as Rs. 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of last thre years less 20%. The profit of the previous three years were : 1st year : Rs. 82,000, 2nd year: Rs. 90,000, 3rd year: Rs. 98,000
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.
Part - d "why is the average profit calculated when only written profit for calculation of goodwill."
Creditors
A's Capital A/c
B's Capital A/c
C's Capital
50,000
80,000
80,000
60,000
P&L A/c
Land & Buildings
Plant & Machinery
Motor Car
Debtors
Cash
30,000
80,000
56,000
54,000
48,000
2,000
2,70,000
2,70,000
The following terms were agreed upon A's retirement.
(a) Goodwill to be valued at Rs.42,000 and not to be shown in the books after A's retirement.
(b) Land and Buildings to be appreciated by Rs.20,000.
(c) Plant and Machinery to be reduced to Rs.46,000.
(d) Provision for doubtful debts to be created at 5% on Debtors.
(e) Create a provision of Rs. 1,400 for discount on creditors.
(f) The sum payable to A to be brought in by B and C in such a manner that their capitals are in proportion to the profit sharing ratio.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet to give effect to the above.
Bills Payable
Creditors
General Reserve
Profit & Loss A/c
X's Capital A/c
Y's Capital A/c
Z's Capital A/c
20,000
40,000
30,000
6,000
60,000
40,000
32,000
Bank
Stock
Furniture
Debtors
45,000
Less: Provision
5,000
Land & Buildings
20,000
20,000
28,000
40,000
1,20,000
2,28,000
2,28,000
Y retired on lst January, 2008. X and Z decided to continue the business as equal partners on the following terms :
(i) The provision for doubtful debts to be maintained at 10% on debtor s.
(ii) Goodwill of the firm was valued at Rs. 57,600.
(iii) Land & Buildings to be increased to Rs.1,32,000.
(iv) Furniture to be reduced by Rs. 8,000.
(v) Rent outstanding (not provided for as yet) was Rs. 1 ,500.
The remaining partners decided to bringin sufficient cash in the business to pay off Y and to maintain a Bank balance of Rs.24,800. They also decided to readjust their capitals as per their new profit sharing ratio.
Prepare the necessary Ledger Accounts and the Balance Sheet.
was below:
It was agreed that i)Goodwill be valued at 27.000.
ii)Depreciation of was to be provided on Machinery
iii)Patents were to be reduced by 20%.
iv)Liability on account of Provident Fund was estimated at 2,400.
v).Chander took over Investments for 15,800
vi)Amit and Balan decided to adjust their capitals in proportion To their profit-sharing ratio by opening current Accounts.
(a) The capital to his credit at the time of his death and interest thereon @ 10% p.a
(b) His proportionate share of General Reserve.
(c) His share of profits for the intervening period will be based on the sales during that period. Sale
from 1st April, 2016 to-30th June, 2016 were as Rs. 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of last thre years less 20%. The profit of the previous three years were : 1st year : Rs. 82,000, 2nd year: Rs. 90,000, 3rd year: Rs. 98,000
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.
Part - d "why is the average profit calculated when only written profit for calculation of goodwill."
Q10. (a) A, B and C are sharing profits in the ratio of 3 : 2 : 1. C dies on 30th June, 2016. Accounts are closed on 31st March every year. Sales for the year ending 31st March, 2016 amounted to Rs.90,00,000. Sales from 1st April 2016 to 30th June 2016 amounted to 36,00,000. The profit for the year ending 31st March, 2016 amounted to Rs.4,50,000.
Calculate the deceased partner's share in the current year's profits.
(b) There is no earning member in C's family and hence it is agreed to take C's daughter into partnership with th share of profits. You are required to identify the virtues involved in making such decision.
Q.10. Rekha, Ruchi and Suruchi are partners. Ruchi retires. Calculate new ratio if continuing partners acquired her share in the ratio of 2 : 3. Also mention the gaining ratio.
ILLUSTRATION 26. (HOTS)
A, B, C and D are partners in a firm sharing profits in the ratio of 3 : 3 : 2 : 2 respectively. D retires and A, B and C decide to share the future profits in the ratio of 3 : 2 : l. Goodwill of the firm is valued at Rs 6,00,000. Goodwill already appears in the books at Rs 4,50,000. The profits for the first year after D's retirement amount to Rs 12,00,000.
3. The Balance Sheet of A, B and C on 31st March, 2007 was as follows:
A's Capital A/c
B's Capital A/c
C's Capital
80,000
80,000
60,000
Land & Buildings
Plant & Machinery
Motor Car
Debtors
Cash
80,000
56,000
54,000
48,000
2,000
The following terms were agreed upon A's retirement.
(a) Goodwill to be valued at Rs.42,000 and not to be shown in the books after A's retirement.
(b) Land and Buildings to be appreciated by Rs.20,000.
(c) Plant and Machinery to be reduced to Rs.46,000.
(d) Provision for doubtful debts to be created at 5% on Debtors.
(e) Create a provision of Rs. 1,400 for discount on creditors.
(f) The sum payable to A to be brought in by B and C in such a manner that their capitals are in proportion to the profit sharing ratio.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet to give effect to the above.
Q. A, B and C are partners sharing profits in the ratio of 2 : 1 : 2. B retired on March 2007. On this date Goodwill of the Firm is valued at Rs. 37,500. There is no goodwill account in the books. Pass journal entries to record Goodwill
Q. X, Y and Z are in partnership sharing profits equally. Their Balance Sheet as on 31st December, 2007 is given below :
Creditors
General Reserve
Profit & Loss A/c
X's Capital A/c
Y's Capital A/c
Z's Capital A/c
40,000
30,000
6,000
60,000
40,000
32,000
Stock
Furniture
Debtors
45,000
Less: Provision
5,000
Land & Buildings
20,000
28,000
40,000
1,20,000
Y retired on lst January, 2008. X and Z decided to continue the business as equal partners on the following terms :
(i) The provision for doubtful debts to be maintained at 10% on debtor s.
(ii) Goodwill of the firm was valued at Rs. 57,600.
(iii) Land & Buildings to be increased to Rs.1,32,000.
(iv) Furniture to be reduced by Rs. 8,000.
(v) Rent outstanding (not provided for as yet) was Rs. 1 ,500.
The remaining partners decided to bringin sufficient cash in the business to pay off Y and to maintain a Bank balance of Rs.24,800. They also decided to readjust their capitals as per their new profit sharing ratio.
Prepare the necessary Ledger Accounts and the Balance Sheet.
additional information:
liability for workmen compensation to the extent of 6000 is to be created
why isn't this liability that has been created recorded in the revaluation account,but only shown as liability in balance sheet?
(i came across the question from T.S grewal -pg 5.31-illustration 30)
Q. Calculate working capital turnover Ratio from the following
Cash Revenue from operations
Current Assets
Current Liabilities
Revenue from operations Returns
12,60,000
7,20,000
3,24,000
80,000