X and Y are in partnership sharing profit and losses in the ratio of 3:2.Their balance sheet as on 31
st March,2012 was as under:
Liabilities Rs. Assets Rs.
15,000 Cash 5,000
12,000 Debtors 20,000
Less:provision 800 19,200
60,000 Patents 14,800
30,000 Investment 8,000
Fixed assets 72,000
10,000 Goodwill 10,000
Creditors
General Reserve
Capital Accounts:
X
Y
Current Accounts:
X
Y 2,000
1,29,000 1,29,000
They admit Z on the following terms:-
a. A provision of 5% is to be created on debtors.
b. Accrued income of Rs.1,500 does not appear in the books and Rs.5,000 are outstanding for
salaries.
c. Present market value of investment is Rs.6,000. X takes over the investments at this value.
d. New profit sharing ratio of partners will be 4:3:2.Z will bring in Rs.20,000 as his capital.
e. Z is to pay in cash an amount equal to his share in firm’s goodwill valued at twice the average
profits of the last 3 years which were Rs.30,000; Rs.26,000 and Rs.25,000 respectively.
f. Half the amount of goodwill is withdrawn by old partners.
You are required to pass journal entries, prepare revaluation A/c, capital A/cs, current A/cs and
the balance sheet.
Answers
Answer:
Explanation:
ANSWER
(i) JOURNAL
1. Bank a/c........ Dr. 96000
To Z's Capital a/c 60000
To Premium for Goodwill a/c 36000
(Being capital and premium for goodwill brought in by Z)
2. Premium for Goodwill a/c.... Dr. 36000
To X's Current a/c 25200
To Y's Current a/c 10800
(Being premium for goodwill distributed among the partners in the ratio of 7:3)
3. X's Current a/c...... Dr. 12600
Y's Current a/c...... Dr. 5400
To Bank a/c 18000
(Being half of the premium for goodwill withdrawn by the partners)
(ii) REVALUATION ACCOUNT
Dr. Cr.
Particulars Amount Particulars Amount
To Provision for
Doubtful debts a/c 600 By Accrued Income a/c 4500
To Outstanding Rent a/c 15000 By Loss on revaluation
- X's Capital a/c
- Y's Capital a/c
10260
6840
To Investment a/c 6000
21600 21600
(iii) PARTNER'S CAPITAL A/C
Dr. Cr.
Particulars X Y Z Particulars X Y Z
By Balance b/d 180000 90000
To Balance c/d 180000 90000 60000 By Bank a/c 60000
180000 90000 60000 180000 90000 60000
(iv) PARTNER'S CURRENT A/C
Dr. Cr.
Particulars X Y Z Particulars X Y Z
To Revaluation a/c 10260 6840 By Balance b/d 30000 6000
To Goodwill a/c 18000 12000 By General Reserve a/c 21600 14400
To Bank a/c 12600 5400 By Premium for
Goodwill a/c 25200 10800
To Investment a/c 18000
To Balance b/d 17940 6960
76800 31200 76800 31200
(v) BALANCE SHEET
Liabilities Amount Assets Amount
Capital a/cs:
- X
- Y
- Z
180000
90000
60000 Patents 44000
Outstanding Rent 15000 Fixed Assets 216000
Current a/cs:
- X
- Y
17940
6960 Accrued Income 4500
Creditors 45000 Cash at Bank
(15000+96000-18000) 93000
Debtors (60000-3000) 57000
414900 414900
Working Note:
1. Calculation of amount of Goodwill:
Average Profit= [90000+78000+75000]/3
= 81000
Goodwill= 81000 * 2
= 162000
Z's share of goodwill= 162000* 2/9
= 36000
2. Sacrificing ratio:
X's sacrifice= 3/5-4/9= 7/45
Y's sacrifice= 2/5-3/9= 3/45
Sacrificing ratio= 7:3