Question

54. A firm has two partners X and Y, sharing profits in the ratio of 3 : 2. They admit Z into the
firm on 1st January, 2020, when the Balance Sheet of the firm was as follows:
BALANCE SHEET
Assets
Liabilities
X's Capital
3,00,000 Fixed Assets
2,60,000
Y's Capital
1,00,000 Investments
1,40,000
General Reserve
70,000 Debtors
90,000
Creditors
80,000 Stock
60,000
Bills Payable
20,000 Cash
20,000
5,70,000
5,70,000
Terms of admission are as follows:
(a) Z is to bring * 2,00,000 as his capital for a third share in future profits and * 35,000 as
his share of goodwill.
(b) Value of fixed assets and stock are to be reduced by 20% and 10,000 respectively.
(c) Capitals of the partners shall be proportionate to their profit sharing ratio, taking Z's
capital as base. Excess capital is to be withdrawn in cash by the partner concerned and the
deficiency is to be made up by bringing in cash.
You are required to prepare Revaluation A/c, Partners' Capital Accounts and the Balance
Sheet of the firm after the above.
C
CE
Аг
BH​

Answer 1

Answer:

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Explanation:

Stock a/c.... Dr. 60000

Debtors a/c... Dr. 80000

Land a/c.... Dr. 100000

Plant and machinery a/c... Dr. 40000

To Z's Capital a/c 130000

To Premium for goodwill a/c 150000

(Being capital and premium for goodwill brought in by C in the form of assets)

2. Premium for Goodwill a/c.... Dr. 150000

To X's Capital a/c 90000

To Y's Capital a/c 60000

(Being premium for goodwill distributed among partners in the ratio of 3:2)

Working Note:

1. Calculation of Z's share of goodwill:

Z's share of Goodwill= 600000 * 1/4= 150000

Z's share of capital = 280000 - 150000 = 130000

2. Distribution of premium for goodwill:

X's share= 3/5 * 150000= 90000

Y's share= 2/5 * 150000= 60000