Question

Following is the Balance Sheet of X and Y as at 31st March, 2018 who are partners in a firm sharing profits and losses in the ratio of 3 : 2 respectively:
Z is admitted as a new partner on 1st April, 2018 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to ₹ 15,000.
(c) An accrued income of ₹ 4,500 does not appear in the books of the firm. It is now to be recorded.
(d) X takes over the Investments at an agreed value of ₹ 18,000.
(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
(f) Z will bring in ₹ 60,000 as his capital by cheque.
(g) Z is to pay an amount equal to his share in firm’s goodwill valued at twice the average profits of the last three years which were ₹ 90,000 ; ₹ 78,000 and ₹ 75,000 respectively.
(h) Half of the amount of the goodwill is to be withdrawn by X and Y.
You are required to pass journal entries, prepare Revaluation Account, Partners Capital and Current Accounts and the Balance Sheet of the new firm.

Answer 1

The journal entries, Revaluation Account, Partners Capital and Current Accounts and the Balance Sheet of the new firm are calculated below:

Explanation:

Calculation of Z's share for Goodwill

Average Profit

$=\frac{90,000+78,000+75,000}{3}=81,000$

Firm's Goodwill

$=81,000 \times 2=1,62,000$

Z's share Goodwill

$=1,62,000 \times \frac{2}{9}=36,000$

36,000 will be shared by X and Y in sacrificing ratio.

Calculation of Sacrifidng Ratio

Sacrifidng Ratio = Old Ratio-New Ratio

X's Sacrifice Ratio

$=\frac{3}{5}-\frac{4}{9}=\frac{27-20}{45}=\frac{7}{45}$

Y's Sacrifice Ratio

$=\frac{2}{5}-\frac{3}{9}=\frac{18-15}{45}=\frac{3}{45}$

Sacrificing Ratio X and Y

$=\frac{7}{45}: \frac{3}{45}=7: 3$

Calculation of Share of Premium of Goodwill

$X^{\prime} s=36,000 \times \frac{7}{10}=25,200$

$Y's=36,000 \times \frac{3}{10}=10,800$

Calculation of Distribution of Loss on Revaluation

$X^{\prime} s=17,100 \times \frac{3}{5}=10,260$

$Y's=17,100 \times \frac{5}{5}=6,840$