A and B are partners sharing profits in the ratio of 3 : 2. They admit C as a new partner from 1st April, 2018. They have decided to share future profits in the ratio of 4 : 3 : 3. The Balance Sheet as at 31st March, 2018 is given below:
Terms of C’s admission are as follows:
(i) C contributes proportionate capital and 60% of his share of goodwill in cash.
(ii) Goodwill is to be valued at 2 years purchase of super profit of last three completed years. Profits for the years ended 31st March were: 2016 – ₹ 4,80,000; 2017 – ₹ 9,30,000; 2018 – ₹ 13,80,000. The normal profit is ₹ 5, 30,000 with same amount of capital invested in similar industry.
(iii) Land and Building was found undervalued by ₹ 1,00,000.
(iv) Stock was found undervalued by ₹ 31,000.
(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors.
(vi) Claim on account of Workmen Compensation is ₹ 11,000. Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet.
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Answer:
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Explanation:
Working Notes :
Working Notes 1:
Calculation of Sacrifice or Gain
(Old Ratio)
(New Ratio)
Sacrificing (or Gaining) Ratio = Old Ratio - New Ratio
A's Share
B's Share
Working Notes 2:
Calculation of Goodwill
C's share of Goodwill
Goodwill brought in Cash
Working Notes 3:
Calculation of C's Capital
Combined Capital A's and B's Capital for
So, C's Capital
Attachments:
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