Question

A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2 . Their Balance Sheet as at 31st March, 2017 stood as follows:
They decided to share profits equally w.e.f 1st April, 2017. They also agreed that:
(i) Value of Land and Building be decreased by 5%.
(ii) Value of Machinery be increased. by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at ₹ 20,000 was unrecorded and is now to be recorded in the books.
(v) Out of Sundry Creditors, ₹ 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years purchase of last 3 years profits. Profits being for
2016-17 – ₹ 50,000 (Loss);
2015-16 – ₹2,50,000 and
2014-15 – ₹ 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at a remuneration ( including expenses) of ₹ 5,000. Expenses came to ₹ 3,000.
Pass journal entries and prepare Revaluation Account.

Answer 1

books.

(v) Out of Sundry Creditors, ₹ 10,000 is not payable.

(vi) Goodwill is to be valued at 2 years purchase of last 3 years profits. Profits being for

2016-17 – ₹ 50,000 (Loss);

2015-16 – ₹2,50,000 and

2014-15 – ₹ 2,50,000.

(vii) C was to carry out the work for reconstituting the

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Answer 2

A's Share = $\frac{2}{10}$-$\frac{5}{10}$ =$\frac{1}{10}$

B's Share = $\frac{2}{5}$-$\frac{3}{10}$ =$\frac{1}{10}$

C's Share = $\frac{1}{5}$ -$\frac{2}{10}$ = 0

Explanation:

1)Calculation of sacrificing Ratio

Old Ratio (X and Y) =2:2:1

New Ratio (X and Y) = 5:3: 2

Sacrificing Ratio =Old ratio - New ratio

A's Share = $\frac{2}{10}$-$\frac{5}{10}$ =$\frac{1}{10}$

B's Share = $\frac{2}{5}$-$\frac{3}{10}$ =$\frac{1}{10}$

C's Share = $\frac{1}{5}$ -$\frac{2}{10}$ = 0

2) Adjustment Entry

A's Capital A/c= 30,000× $\frac{1}{10}$= 3,000(Dr)

B's Capital A/c = = 30,000× $\frac{1}{10}$= 3,000(Cr)