Question

M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st March, 2015 was as follows:
On the above date, O was admitted as a new partner and it was decided that:
(i) The new profit-sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at ₹ 1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was ₹ 36,000.
(iv) Machinery will be reduced to ₹ 58,000.
(v) A creditor of ₹ 6,000 was not likely to claim the amount and hence was to be written off.
(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the new firm.

Answer 1

Explanation:

Working Notes:

Working Notes 1:

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio

$\mathrm{L's}=\frac{3}{6}-\frac{2}{6}=\frac{1}{6}$

$\mathrm{M}^{\prime} \mathrm{s}=\frac{2}{6}-\frac{2}{6}=N i l$

$N$'$s$ $=\frac{1}{6}-\frac{1}{6}=N i l$

Working Notes 2:

Adjustment of Goodwill

O's Share of Goodwill $=1,80,000 \times \frac{1}{6}=\mathrm{Rs} 30,000$

$\mathrm{Rs} 30,000$ will be credited to L's Capital A/c, as he is the only sacrificing partner.

Working Notes 3:

Adjusted Old Capital of L $=1,20,000+21,000+30,000-15,000=\mathrm{Rs} 1,56,000$

Adjusted Old Capital of M

$=80,000+14,000-10,000=\mathrm{Rs} 84,000$

Adjusted Old  Capital of N

$=40,000+7,000-5,000=\mathrm{Rs} 42,000$

Total Adjusted Capital

$=1,56,000+84,000+42,000=\mathrm{Rs} 2,82,000$

O's Proportionate Capital = Total Adjusted Capital × O's Profit Share × Reciprocal of Combined New Share of Old Partners

$=2,82,000 \times \frac{1}{6} \times \frac{6}{5}=\mathrm{Rs} 56,400$