A and B are partners in a firm. They share profits and losses as 4/5th and 1/5th respectively. Below is given the Balance Sheet of the firm as at 31st march,2012:
 

C wants to join the firm from 1st April, 2012. He is willing to pay goodwill premium to partners amounting to Rs 20,000. In return he will be allowed to share 1/5th of the future profits of the firm which he acquires equally from A and B. The following revaluation of the assets is agreed upon : Plant to be reduced to Rs 60,000, stock to Rs 65,000 and debtors to Rs 50,000 (Rs 10,000 proved bad debts). The new partner is to introduce 50% of the adjusted capitals of the existing partners. You are required to give journal entries recording the above transactions. Give also the opening balance sheet of the new firm and new profit sharing ratio.

[Ans: Loss on revaluation Rs 40,000; capital ; A Rs 1,01,000; B Rs 39,000 ; and C Rs 70,000; balance Sheet Total Rs 2,90,000; New profit sharing ratio 7:1:2]
 


Dear Student
 
Journal
Date Particulars   Debit Amount (Rs.) Credit Amount (Rs.)
         
  Cash A/c  Dr. 20,000  
    To Premium for Goodwill A/c     20,000
  (Being C brought premium for goodwill)      
         
  Premium for Goodwill A/c Dr. 20,000  
    To A's Capital A/c     10,000
    To B's Capital A/c     10,000
  (Being premium adjusted in sacrificing ratio)      
         
  Revaluation A/c Dr. 40,000  
    To Plant     15,000
    To Stock     15,000
    To Debtors     10,000
  (Being revaluation done)      
         
  A's Capital A/c (40,000 x 4/5) Dr. 32,000  
  B's Capital A/c (40,000 x 1/5) Dr. 8,000  
    To Revaluation A/c     8,000
  (Being Revaluation loss transferred to Partners capital accounts)      
         
  Cash A/c  Dr. 70,000  
    To C's Capital A/c     70,000
  (Being capital introduced by C)      
 
Balancesheet
Liabilities Amount (in Rs) Assets Amount (in Rs)
Creditors 65,000 Plant 60,000
Bills Payable 15,000 Stock 65,000
    Debtors 50,000
       
Capital   Cash  115,000
A 101,000    
B 39,000    
C 70,000    
       
       
  290,000   290,000
 
Calculation of New PSR
Particulars A C C
Old Ratio   4/5   1/5 0     
Share of New Partner       1/5
Total share sacrificed by Old partners for new partner   1/10   1/10  
  (1/5 x 1/2) (1/5 x 1/2)  
New Share of A and C   7/10   1/10  
  (4/5 - 1/10) (1/5 - 1/10)  
       
Therefore New PSR   7/10   1/10   1/5 or 2/10

  
Goodwill Adjustment    
     
Sacrificing Ratio   1:1
Share of Goodwill of C   20,000
Distribution in Sacrificing Ratio    
A's Capital A/c (20,000 x 1/2) 10,000
B's Capital A/c (20,000 x 1/2) 10,000
     
 
Partner's Capital A/c
Particulars A's Capital A/c B's Capital A/c C's Capital A/c Particulars A's Capital A/c B's Capital A/c C's Capital A/c
Goodwill 16,000 4,000   Balance b/d 115,000 35,000  
Revaluation A/c 32,000 8,000   Cash     70,000
        Premium for Goodwill A/c 10,000 10,000  
        Reserve 24,000 6,000  
               
Bal C/d 101,000 39,000 70,000        
               
               
               
               
  149,000 51,000 70,000   149,000 51,000 70,000

Capital Adjustment    
Combined Capital of A and B after all adjustments   140,000
Capital of C = 50% of Combined capital (1,40,000 x 50%) 70,000
     



Regards

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