A, B and Care partners sharing profits and losses in the ratio of 2:3:5. On 31st March, 2020, their Balance Sheet was:
Liabilities
64,000
22,000
14,000
Creditors
Bills Payable
General Reserve
Capital A/cs:
Cash
Bills Receivable
Stock
Debtors
Machinery
Goodwill
36,000
44,000
52,000
А
В
C
GAN
1,32,000
2,32,000
232.00
They admit D into the partnership on the following terms:
(a) Machinery is to be depreciated by 15%.
(b) Stock is to be revalued at $ 48,000.
(c) It is found that the Creditors included a sum of 12,000 which was not to be paid.
(d) Outstanding Rent is 1,900.
(e) Dis to bring in 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 school
Prepare Revaluation Account, Partners' Capital Accounts, Cash Account and Balance Sheet of the new
Answers
Step-by-step explanation:
Given A, B and Care partners sharing profits and losses in the ratio of 2:3:5. On 31st March, 2020, their Balance Sheet was:
Working note 1 will be to calculate the new profit sharing ratio
So old ratio is 2:3:5 = 2/10 : 3/10 : 5/10
So D’s share = 2/5
Let the total profit be 1
Remaining profit = 1 – 2/5 =3/5
So new ratio = old ratio x profit remaining.
A = 2/10 x 3/5
Or A = 6/50
So share of B will be
B = 3/10 x 3/5
Or B = 9/50
Similarly C = 5/10 x 3/5 = 15 / 50
So D = 2/5 now multiply and divide by 10 we get
So D = 20 / 50
So new ratio is 6/50 : 9/50 : 15/50 : 20/50
Or we get 6:9:15:20
Now work note 2 will be
Calculation of sacrificing ratio:
So old ratio = 2:3:5 = 2/10 : 3/10 : 5/10
So new ratio = 6:9:15:20 = 6/50 : 9/50 :15/50 : 20/50
Therefore sacrifice ratio = old ratio – new ratio:
A = 2/10 – 6/50 = 10 – 6 / 50 = 4/50
B = 3/10 – 9/50 = 15 – 9 / 50 = 6/50
C = 5/10 – 15/50 = 25 – 15 /50 = 10/50
So sacrifice ratio is 4/50 : 6/50 : 10/50 or 4:6:10
Or 2:3:5
Working note 3 : Distribution of D’s Goodwill
So share of A will be Rs 6000 x 2/10 = 1,200
Share of B will be Rs 6000 x 3/10 = 1,800
Share of C will be Rs 6000 x 5/10 = 3000
Revaluation Account
Particulars Rs Particulars Rs
To machinery A/C 14,000 By stock A/C 4000
To outstanding rent 1,900 By creditors A/C 12,000
16,000 16,000
Partners Capital Account
Particulars A B C D Particulars A B C D
To Goodwill A/C 4000 6000 10000 By balance 36000 42000 52000 –
(2:3:5)
To balance c/d 36,000 44,000, 52,000 88000 premium
For goodwill 1200 1800 3000
By general reserve
(2:3:5) 2800 4200 7000
By cash A/C
40,000 50,000 62000 88000 40,000 50,000 62,000 88000
Working note 4: Calculation of D’s Capital:
So D’s capital = Total adjusted capital of A,B, C x reciprocal of combined profit x D’s share of profit.
= (36,000 + 44,000 + 52,000) x 5/3 x 2/5
= 1,32,000 x 10 / 15
= Rs 88,000
Cash Account
Particulars Rs Particulars Rs
To Balance b/f 18000 By balance carried down 120000
To D’s capital A/c 88000
To Premium for Goodwill A/C 6000
1,12,000 1,12,000
Balance sheet as on March 31st 2020
Liabilities Rs Assets Rs
Creditors 64,000 Cash 1,12,000
Less:not to be paid Bills receivable 14,000
(12,000) 52000
Outstanding rent 1900 Stock 48,000
Bills payable 22000 Machinery 79,900
Capital of
A 36,000
B 44,000
C 52,000
D 88,000 total 2,20,000
2,95,900 2,95,900
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