Question

X and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st March, 2018 was:
They admit Z into partnership on the same date on the following terms;
(a) Z brings in ₹ 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in ₹ 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at ₹ 10,000. X takes over Investments at this value.
(d) Typewriter is to be depreciated by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on 31st March, 2018 is ₹ 1,000.
(f) By bringing in r withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet of the firm.

Answer 1

The journal entries, Revaluation Account, Capital Accounts and new Balance Sheet of the firm are prepared below:

Explanation:

Given,

X and Y are partners sharing profits in the ratio of 2 : 1.

Sacrificing Ratio

Old Ratio $(\mathrm{X} \text { and } \mathrm{Y})=2: 1$

Sacrificing Ratio $(\mathrm{X} \text { and } \mathrm{Y})-2: 1$

Distribution of Revaluation Loss

X's capital A/c

$=11,700 \times \frac{2}{3}=7,800$

Y's Capital A/c

$=11,700 \times \frac{1}{3}=3,900$

Distribution of Premium for Goodwill

X Premium for Goodwill

$=15,000 \times \frac{2}{3}=10,000$

Y Premium for Goodwill

$=15,000 \times \frac{1}{3}=5,000$

Adjustment of Capital

Total capital of the firm on the basis of Z's share

$=40,000 \times \frac{4}{1}=1,60,000$

Combined capital of X and Y = Total Capital of the firm -Z's capital

$=1,60,000-40,000$

$=1,20,000$

X's Capital A/c

$=1,20,000 \times \frac{2}{3}=80,000$

Y's Capital A/c

$=1,20,000 \times \frac{1}{3}=40,000$