Question

4. X and Y are in partnership sharing profit and losses in the ratio of 3:2. Their balance sheet as on 31"
March 2012 was as under:
Liabilities
Creditors
General Reserve
Capital Accounts:
X
Rs.
15,000
12,000
Rs
5,000
20,000
800
Assets
Cash
Debtors
Less:provision
Patents
Investment
Fixed assets
Goodwill
60,000
30,000
19,200
14,800
8,000
72,000
10,000
Current Accounts:
10,000
2,000
| 1,29,000
1,29,000
They admit Z on the following terms:-
a. A provision of 5% is to be created on debtors.
b. Accrued income of Rs.1,500 does not appear in the books and Rs.5,000 are outstanding for
salaries.
c. Present market value of investment is Rs.6,000. X takes over the investments at this value.
d. New profit sharing ratio of partners will be 4:3:2.Z will bring in Rs.20,000 ashiscapital.
e. Z is to pay in cash an amount equal to his share in firm's goodwill valued at twice the average
profits of the last 3 years which were Rs.30,000; Rs.26,000 and Rs. 25,000 respectively.
f. Half the amount of goodwill is withdrawn by old partners.
You are required to pass journal entries, prepare revaluation A/c, capital A/cs, current A/cs and
the balancesheet.​

Answer 1

They admit Z into partnership with 1/8

th

share in profits on this date. Z brings Rs.20,000 as his capital. Rs.12,000 for goodwill in cash. Z acquires share entirely from X. Following revaluation 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 account and new Balance Sheet. Also calculate new profit-sharing ratio.

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