Question

Following is the Balance Sheet of Abha and Binay as at 31st March, 2014:
Chitra was admitted as a partner for 1/4th share in the profits of the firm. It was decided that:
(a) Bad Debts amounted to ₹ 1,500 will be written off.
(b) Stock worth ₹ 8,000 was taken over by Abha and Binay at Book Value in their profit-sharing ratio. The remaining stock was valued at ₹ 2,500.
(c) Plant and Machinery and Goodwill were valued at ₹ 32,000 and ₹ 20,000 respectively.
(d) Chitra brought her share of goodwill in cash.
(e) Chitra will bring proportionate capital and the capitals of Abha and Binay will be adjusted in their profit-sharing ratio by bringing in or paying off cash as the case may be.
Prepare Revaluation Account and Partners Capital Accounts.

Answer 1

Explanation:

Working Notes:

Working Notes 1:

Calculation of Chitra's Capital

Chitra's  Capital = Total Adjusted Capital of Abha and Binay × Reciprocal of Combined Profit Share × Chitra's Profit Share

Abha's Adjusted Capital $=55,000+2,500+7,500-14,000-5,000-2,500-4,000=\text { Rs } 39,500$

Binay's Adjusted Capital $=30,000+2,500+7,500-14,000-5,000-2,500-4,000=\text { Rs } 14,500$

Chitra's Capital

$=(39,500+14,500) \times \frac{4}{3} \times \frac{1}{4}=\mathrm{Rs} 18,000$

Working Notes 2

Calculation of New Capital

New Capital = Total Adjusted Capital × Respective Partner's Profit Share

Abha's New Capital = $(39,500+14,500) \times \frac{1}{2}=\text { Rs } 27,000$

Binay's New Capital = $(39,500+14,500) \times \frac{1}{2}=\text { Rs } 27,000$

Working Notes 3:

Calculation of Chira's Share of Goodwill

Chitra's Share = Firms Goodwill × Chitra's Profit Share

$=20,000 \times \frac{1}{4}=\text { Rs } 5,000$

$Rs 5,000$ will be shared between Abha and Binay in Sacrificing ratio $1: 1$