Journal entry of machinery book value 600000 was given to creditors at a discount of 20%.
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Asked on December 26, 2019 by
Sonam Himanshu
Pass the Journal entries, for the following transactions on the dissolution of the firm of P and Q after various assets (other than cash) and outside liabilities have been transferred to Realisation Account
(a) Stock Rs. 2,00,000. 'P' took over 50% of stock at a discount of 10%. Remaining stock was sold at a profit of 25% on cost.
(b) Debtors Rs. 2,25,000. Provision for Doubtful Debts Rs. 25,000. Rs. 20,000 of the book debts proved bad.
(c) Land and Building (Book value Rs. 12,50,000) sold for Rs. 15,00,000 through a broker who charged 2% commission.
(d) Machinery (Book value Rs. 6,00,000) was handed over to a creditor at a discount of 10%
(e) Investment (Book value Rs. 60,000) ranted at 125%.
(f) Goodwill of Rs. 75,000 and prepaid fire insurance of 10,000.
(g) There was an old furniture in the firm which had been written off completely in the books. This was sold for Rs. 10,000.
(h) 'Z' an old customer whose account for Rs.
20,000 was written off as bad in the previous year, paid 60%.
(i) 'P' undertook to pay Mrs. P's loan of Rs. 50,000.
(j) Trade creditors Rs. 1,60,000. Half of the trade cretlitors accepted Plant and Machlnery at an agreed valuation of Rs. 54,000 and cash in full settlement of their claims after allowing a discount of Rs. 16,000.
Remaining trade creditors were paid 90% in final settlement
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ANSWER
(a) P's Capital A/C..... Dr. 90000
Bank A/C.... Dr. 125000
To Realisation A/C 215000
(Being stock taken over by P and rest sold off)
(b)(i) Bank A/C..... Dr. 225000
To Realisation A/C 225000
(Being debtors realised)
(ii) Realisation A/C..... Dr. 5000
To Bank A/C 5000
(Being provision sold off after book debts proved bad)
(c) Bank A/C..... Dr. 1470000
To Realisation A/C 1470000
(Being land and building sold after charging 2% commission on sale)
(d) No entry will be passed as no bank or cash is involved.
(e) Bank A/C..... Dr. 75000
To Realisation A/C 75000
(Being investments realised at 125%)
(f) No entry will be passed for goodwill as well as prepaid fire insurance as it has not realised any amount.
(g) Bank A/C..... Dr. 10000
To Realisation A/C 10000
(Being unrecorded asset realised)
(h) Bank A/C.... Dr. 12000
To Realisation A/C 12000
(Being bad debt recovered @ 60%)
(i) Realisation A/C.... Dr. 50000
To P's Capital A/C 50000
(Being Mrs. P's loan discharged by Mr. P)
(j) (1) Realisation A/C.... Dr. 10000
To Bank A/C 10000
(Being creditors paid in cash after discount of Rs. 16000)
(2) Realisation A/C..... Dr. 72000
To Bank A/C 72000
(Being creditors paid 90%)