Question

Smile, Laugh and Pleasure are partners in a firm

sharing profits and losses in the ratio of 2:3:1.They

decide to share future profits and losses in the ratio of

3:2:1.with effect from 1st April 2015.Their Balance

sheet a debit balance of Rs.24,000 in Profit and Loss Account and a balance of Rs.1,44,000 in General

Reserve. For this purpose it was agreed that

a) The goodwill of the firm be valued at Rs.1, 80, 000

b) Creditors amounting to Rs.2, 400 were not likely to

be claimed.

c) The machinery (having book value of Rs.3, 00. 000)

be depreciated by 6%.

d) Unrecorded investments to be valued Rs.1,35,600

e)The land (having book value of Rs.3,00,000)be valued

at Rs.4,80,000.

Give the necessary single adjustment entry to

record the above arrangement.​

Answer 1

Answer:

sacrifice= old share - new share

smile = 2/6-3/6 = -1/6 (gain)

laugh = 3/6-2/6 = 1/6 (sacrifice)

pleasure = 1/6-1/6 = nil

total credited/debited to partners capital account = 1,44,000+1, 80,000+3, 00,000(gain on revaluation) - 24,000 = 6,00,000

net effect on 6,00,000

smile's capital account... Dr 1,00,000

to laugh's capital account 1,00,000

okay credit all the things which results in increase in capital of partners and vice versa

gain on revaluation = 2400(creditors) + 1,35,600(investments) + 1,80,000 ( building) - 18,000 = 3,00,000