Question

Q.7 A and B are partners sharing profits in 3:2. They decided to admit Cinto partnership for
1/4th share. On the date of admission, the Balance Sheet shows the balance of Investment
Fluctuation Reserve of Rs. 40,000 and an Investment of Rs.3,50,000.Pass thejournal entries in the
below mentioned cases:
Case-1 There is no change in the market value of investment.
Case-2 The market value of investment is estimated at Rs.3,80,000.
Case-3 The market value of investment is estimated at Rs.3,20,000.
Case-4 The market value of investment is estimated at Rs.2,50,000.​

Answer 1

Answer:

Case 1 -

Investment Fluctuation Reserve a/c Dr ₹40,000

 To A's Capital a/c                                 ₹24,000

 To B's Capital a/c                                 ₹16,000

(Being investment fluctuation reserve distributed among old partners)

Case 2 -

Investment Fluctuation Reserve a/c  Dr ₹40,000

Investment a/c                                 Dr ₹30,000

  To Revaluation a/c                               ₹30,000

  To A's Capital a/c                                 ₹24,000

  To B's Capital a/c                                 ₹16,000

(Being appreciated value of investment transferred to revaluation a/c & Investment fluctuation reserve distributed among old partners)

Case 3 -

Investment Fluctuation Reserve a/c Dr ₹40,000

  To Investment a/c                                ₹30,000

  To A's Capital a/c                                 ₹6,000

  To B's Capital a/c                                 ₹4,000

(Being excess investment fluctuation reserve transferred to old partners capital a/c)

Case 4 -

Investment Fluctuation Reserve a/c Dr ₹40,000

Revaluation a/c                                Dr ₹60,000

  To Investment a/c                                ₹1,00,000

(Being invesment fluctuation reserve used to adjust with market value of investment and excess loss transferred to revaluation a/c)

I hope it helps :)

Explanation: