Question

A and B are partners sharing profits in 3:2. They decided to change ratio to 1:1. For this purpose goodwill is valued at

three years purchase of the weighted average profits of last five years.

Year ending on 31st March 2013 50,000

Year ending on 31st March 2014 60,000

Year ending on 31st March 2015 80,000 (loss)- (includes voluntary retirement compensation Rs 80,000)

Year ending on 31st March 2016 1,00,000

Year ending on 31st March 2017 90,000

Weights assigned to each year would be 1,2,3,4,5 respectively. It was observed that:

i. It was decided to get the property insured in future at an annual charge of Rs 2,300.

ii. Repairs to Plant amounting to Rs 12,000 was wrongly charged to Plant A/c on 1st December, 2015. Depreciation

was charged on Plant @10% p.a. on diminishing balance method.

iii. Closing stock as on 31st March, 2015 was undervalued by Rs 20,000.

iv. During the year ended 31st March, 2013, the management cost of Rs 1,500 was not debited due to oversight.​

Answer 1

Explanation:

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