Question

Following is the Balance Sheet of X and Y as at 31st March, 2018. Z is admitted as a partner on that date when the position of X and Y was:
X and Y share profits in the proportion of 3 : 2. The following terms of admission are agreed upon:
(a) Revaluation of assets: Building ₹ 18,000; Stock ₹ 16,000.
(b) The liability on Workmen Compensation Reserve is determined at ₹ 2,000.
(c) Z brought as his share of goodwill ₹ 10,000 in cash.
(d) Z was to bring in further cash as would make his capital equal to 20% of the combined capital of X and after above revaluation and adjustments are carried out.
(e) The further profit-sharing proportions were: X – 2/5th, Y – 2/5th and Z – 1/5th.
Prepare new Balance Sheet of the firm and Capital Accounts of the Partners.

Answer 1

Explanation:

Working Notes:

Working Notes 1:

Sacrificing Ratio

                  X : Y

Old Ratio   3 : 2

                  X : Y : Z

New Ratio 2 : 2 : 1

Sacrificing Ratio = Old Ratio - New Ratio

$\mathrm{X}^{\prime} \mathrm{s}$ $=\frac{3}{5}-\frac{2}{5}=\frac{1}{5}$

$Y^{\prime} s$ $=\frac{2}{5}-\frac{2}{5}=0$

Only X is sacrificing 1/5 portion of Profit in favour of Z. Therefore amount of Premium for Goodwill will be taken by X only.

Writing Notes 3:

Calculation of Z's Capital

Combined capital of X and Y after all adjustments $=39,200+20,800=\mathrm{Rs} 60,000$

Z's Capital $=60,000 \times \frac{20}{100}=\mathrm{Rs} 12,000$