A,B and C are partners sharing profits and losses in the ratio of 2:3:5. On 31st March, 2019, their Balance Sheet was: They admit D into the partnership on the following terms:
(a) Machinery is to be depreciated by 15%.
(b) Stock is to be revalued atRs 48,000.
(c) It is found that the Creditors included a sum of Rs 12,000 which was not to be paid.
(d) Outstanding Rent is Rs 1,900. (e) D is to bring inRs 6,000 as goodwill and sufficient capital for 2/5th share.
(f) The partners decided to use 10% of the profits every year in providing drinking water in schools, where required.
Prepare Revaluation Account, Partners' Capital Accounts, Cash Account and Balance Sheet of the new firm.
Answers
Answer:
Journal entries
Date
Particulars
Amt.(Dr.)
Amt.(Cr.)
1.
Revaluation A/c
Dr.
29500
To Land and Building A/c
17500
To Machinery A/c
12000
(being decrease in assets)
2.
Motor cycle A/c
Dr.
20000
To Revaluation A/c
20000
(being motor cycle now recorded in books
3.
Sundry creditors A/c
Dr.
10000
To Revaluation A/c
10000
(being decrease in value of creditors)
4.
Revaluation A/c
Dr.
5000
To Cash A/c (expenses)
3000
To C’s Capital A/c
2000
(being revaluation expenses and C’s remuneration recorded)
5.
Revaluation A/c
Dr.
2500
To Provision for debtors A/c
2500
(being provision on debtors created)
6.
A’s Capital A/c
Dr.
B’s Capital A/c
Dr.
C’s Capital A/c
Dr.
To Revaluation A/c
(being transfer of loss on revaluation in old ratio)
7.
A’s Capital A/c
Dr.
2500
B’s Capital A/c
Dr.
1500
C’s Capital A/c
Dr.
1000
To Advertisement Suspense A/c
5000
(being advertisement suspense written off)
8.
B’s Capital A/c
Dr.
13000
C’s Capital A/c
Dr.
52000
To A’s Capital A/c
65,000
(being adjustment for goodwill, general reserve and investment fluctuation reserve)
Revaluation A/c
Particulars
Amount
Particulars
Amount
To Land and Buildings A/c
17500
By Motor cycle A/c
20000
To Machinery A/c
12000
By Sundry creditors A/c
10000
To Cash A/c
3000
By Partner’s Capital A/c:
7000
To C’s Capital A/c
2000
A (5/10) : 3500
To Provision for debtors A/c
2500
B (3/10) : 2100
C (2/10) : 1400
37000
37000
Workings:
1. Calculation of gain and sacrifice:
A: 1/3 -5/10 = (5/30)
B: 1/3 – 3/10 = 1/30
C: 1/3 – 2/10 = 4/30
2. Goodwill = [(50000) + 250000+ 250000] / 3
= 150000 x 2 = 300000