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 ₹ 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 ₹ 2,25,000. Provision for Doubtful Debts ₹ 25,000; ₹ 20,000 of the book debts proved bad.
(c) Land and Building (Book value ₹ 12,50,000) sold for ₹ 15,00,000 through a broker who changed 2% commission.
(d) Machinery (Book value ₹ 6,00,000) was handed over to a creditor at a discount of 10%.
(e) Investment (Book value ₹ 60,000) realised at 125%.
(f) Goodwill of ₹ 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 ₹ 10,000.
(h) Z an old customer whose account for ₹ 20,000 was written off as bad in the previous year paid 60%.
(i) P undertook to pay Mrs. P’s loan of ₹ 50,000.
(j) Trade creditors ₹ 1,60,000. Half of the trade creditors accepted Plant and Machinery at an agreed valuation of ₹ 54,000 and cash in full settlement of their claims after allowing a discount of ₹ 16,000.
Remaining trade creditors were paid 90% in final settlement.
Answers
Answer:
As per the journal,
(A) An amount of Rs. 90,000 and Rs. 1,25,000 has been debited from the P's capital A/c and bank account and it has been credited to Realisation account.
This is being the amount when stock realised
(B) An amount of Rs. 2,05,000 has been debited from the Bank account and it has been credited to the realisation A/c.
This is being the amount when the debtors realised
(C) An amount of Rs. 14,70,000 has been debited from the bank account and it has been credited to the realisation A/c
This is being the amount when the land and the buildings realised.
(D) No entry
(E) An amount of Rs. 75,000 has been debited from the bank account and it has been credited to the realisation A/c
This is being the amount when the investment realised
(F) No entry
(G) An amount of Rs. 10,000 has been debited from the bank account and it has been credited to the realisation A/c
This is being the amount when the unrecorded furniture realised.
(H) An amount of Rs. 12,000 has been debited from the bank account and it has been credited to the realisation A/c
This is being the amount when the bad debts recovered.
(I) An amount of Rs. 50,000 has been debited from the realisation account and it has been credited to the P's capital A/c
This is being the amount when the wife's loan paid by partner
(J) An amount of Rs. 82,000 has been debited from the realisation account and it has been credited to the bank A/c
This is being the amount the creditors paid.
