X, Y and Z are equal partners with capital ₹15000,₹17500 and ₹20000 respectively.They agree to admit W into equal partnership upon payment in cash, ₹15000 for 1/4th share of goodwill and ₹18000 as his capital, both sums to remain in the business. The liabilities of the old firm were ₹30000 and the assets, apart from cash, consist of Motors ₹12000, furniture ₹4000, stock ₹26500 and Debtors ₹37800. The Motors and Furniture were revalued at ₹ 9500 and ₹ 3800 respectively.
pass the journal entries to give effect to the above arrangement and also show Balance sheet of the firm.
Answers
Answer:
(i) Calculation of amount of Cash before admission of partner:
Total assets excluding cash= 1200+400+2650+3780= 8030
Total liabilities= 1500+1750+2000+3000= 8250
Therefore, Cash= 8250- 8030
= 220
(ii) JOURNAL
1. Cash a/c... Dr. 3300
To W's Capital a/c 1800
To Premium for goodwill a/c 1500
(Being capital and premium for goodwill brought in by W)
2. Premium for goodwill a/c... Dr. 1500
To X's Capital a/c 500
To Y's Capital a/c 500
To Z's Capital a/c 500
(Being premium for goodwill distributed among the partners in the ratio of 1:1:1)
3. Revaluation a/c... Dr. 270
To Motor Car a/c 250
To Furniture a/c 20
(Being decrease in value of assets transferred to revaluation account)
4. X's Capital a/c.... Dr. 90
Y's Capital a/c.... Dr. 90
Z's Capital a/c.... Dr. 90
To Revaluation a/c 270
(Being loss on revaluation transferred to partner's capital accounts in the ratio of 1:1:1)
(iii) BALANCE SHEET
(After admission of W)
Liabilities Amount
(in Rs.) Assets Amount
(in Rs.)
Motor Car 950
Capital
- X (1500+500-90)
- Y (1750+500-90)
- Z (2000+500-90)
- W
1910
2160
2410
1800 Furniture 380
Other Liabilities 3000 Stock 2650
Debtors 3780
Cash (220+3300) 3520
TOTAL 11280 TOTAL 11280