Question

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 ₹ 20,000 as capital for 1/4th share. He also pays ₹ 5,000 as premium for goodwill.
(b) Debtors amounted to ₹ 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 ₹ 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 ₹ 4,900 against cash payment.
You are required to prepare Revaluation Account, Partner’s Capital Accounts and new Balance Sheet.

Answer 1

The Revaluation Account, Partner’s Capital Accounts and new Balance Sheet are prepared below

Explanation:

Given,

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2.

C is to pay ₹ 20,000 as capital for 1/4th share.

Old Ratio and Sacrificing Ratio:

Old Ratio $(A \text { and } B)=3: 2$

Sacrificing Ratio $(A \text { and } B)=3: 2$

Calculation of Distribution of Premium for Goodwill

A's Premium for Goodwill

$=5,000 \times \frac{3}{5}=3,000$

B's Premium for Goodwill

$=5,000 \times \frac{2}{5}=2,000$

Thus, A and B's premium for Goodwill will be Rs. 3000 and Rs.2000 respectively.