Question

Following is the Balance Sheet of the firm, Ashirvad, owned by A, B and C who share profits and losses of the business in the ratio of 3 : 2 : 1.
On 1st April, 2018, they admit D as a partner on the following conditions:
(a) D will bring in ₹ 1,20,000 as his capital and also ₹ 30,000 as goodwill premium for a quarter of the share in the future profits/losses of the firm.
(b) The values of the fixed assets of the firm will be increased by 10% before the admission of D.
(c) Mohan, an old customer whose account was written off as bad debts , has promised to pay ₹ 3,000 in full settlement of his dues.
(d) The future profits and losses of the firm will be shared equally by all the partners.
Pass the necessary journal entries and Prepare Revaluation Account, Partners Capital Accounts and opening Balance Sheet of the new firm.
Note: There will be no entry for the promise made by Mohan, since it is an event and not a transaction. There is another view, ₹ 3,000 is to be considered as bad debts recovered. In this situation result will be as follows:
Gain( Profit) on Revaluation – ₹ 36,000; Capital A/c’s: A – ₹ 1,66,000; B – ₹ 1,42,000; C – ₹ 1,16,000; D – ₹ 1,20,000; Balance Sheet Total – ₹ 5,72,000.

Answer 1

Answer:

A company's balance sheet, also known as a "statement of financial position," reveals the firm's assets, liabilities and owners' equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company's financial statements.

Answer 2

The necessary journal entries, Revaluation Account, Partners Capital Accounts and opening Balance Sheet of the new firm are prepared below:

Explanation:

Calculation of New Shares:

Old Ratio A, B and C =3: 2: 1

New Ratio A, B, C and D=1: 1: 1: 1

Sacarifidng = Old Ratio-New Ratio

A's Share

$=\frac{3}{6}-\frac{1}{4}=\frac{12-6}{24}=\frac{6}{24} (Sacrifice)$

B's Share

$=\frac{2}{6}-\frac{1}{4}=\frac{8-6}{24}=\frac{2}{24} (Sacrifice)$

C's Share

$=\frac{1}{6}-\frac{1}{4}=\frac{4-6}{24}=\frac{-2}{24} (Gaining)$

Sacrificing Ratio A and B

$=\frac{6}{24}: \frac{2}{24}=3: 1$

Calculation of Goodwill:

Goodwill of the firm $=\mathrm{D}^{\prime} s Goodwill \times \frac{4}{1} =30,000 \times \frac{4}{1}=1,20,000$

C's gain in Goodwill

$=1,20,000 \times \frac{2}{24}=10,000$

Calculation of Premium for Goodwill:

Amount of Goodwill to be distributed between A and B (Sacrificing Partners)

Premium for Goodwill = Rs. 30,000

A's Premium for Goodwill

$=30,000 \times \frac{3}{4}=22,500$

B's Premium for Goodwill

$=30,000 \times \frac{1}{4}=7,500$

Distribution C's gain in Goodwill

A's gain in Goodwill

$=10,000 \times \frac{3}{4}=7,500$

B's gain in Goodwill

$=10,000 \times \frac{1}{4}=2,500$

The Journal Entries for Capital brought in by D and distribution of Goodwill are prepared below,