According to a question,A and B are partners sharing profits in the proportion of 3:2. Their Balance Sheet as at 31st March, 2012 was as follows:

Liabilities indlude Sundry Creditors-Rs.63000,Outstanding Salaries-Rs.4000,General Reserve-Rs.10000,Capital of A and B are Rs. 50000 and Rs.30000 respectively.

Assets include Cash at Bank-Rs.5000,Sundry Debtors -Rs.30000 less Provision=Rs.1000,,Stock-Rs.40000,Trade Marks-Rs.8000,Building-Rs.75000.

They agree to admit C as a new partner on the following terms:

(1). C will be given 2/9th share of profit and he will bring Rs.50000 for his share of capital and goodwill.

(2). Goodwill of the firm will be calculated at 2.5 yrs purchase of the average super profits of last 4 yrs.Profits of the last 4 yrs. are Rs.40000,Rs,40000,Rs.55000 and Rs.65000 respectively.Normal profits that can be earned with the capital employed are Rs.14000.

(3). Half the amount of goodwill is withdrawn by old partners.

(4). 15% of the general reserve is to remain as a provision against doubtful debts.

(5). Outstanding salaries be increased to Rs.6000,Stock is to be reduced by 20% and buildings be increased by 20%.Trade Marks be written off by 50%.

(6). New profit sharing ratio of partners will be 4:3:2 and the capital accounts of A and B will be adjusted on the basis of C'S capital by bringing in or withdrawing cash,as the case may be.

Prepare necessary accounts and the opening balance sheet the firm.

Please can I get the solution.

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

 

 

 

 

Stock

8,000

Building

15,000

Outstanding Salaries

2,000

 

 

Trade Marks

4,000

 

 

Profit to transferred to:

 

 

 

A

600

 

 

 

B

400

1,000

 

 

 

15,000

 

15,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

 

 

 

 

Balance b/d

50,000

30,000

 

Bank A/c

7,000

3,000

 

Revaluation A/c (Profit)

600

400

 

Balance c/d

62,700

36,800

50,000

General Reserve

5,100

3,400

 

 

 

 

 

Premium for Goodwill

14,000

6,000

 

 

 

 

 

Bank A/c

 

 

50,000

 

69,700

36,800

50,000

 

69,700

36,800

50,000

 

 

 

 

Balance b/d

62,700

36,800

50,000

Balance c/d

1,00,000

75,000

50,000

Bank A/c

37,300

39,200

 

 

1,00,000

75,000

50,000

 

1,00,000

75,000

50,000

 

 

 

 

 

 

 

 

 

Balance Sheet

after C’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

 

 

 

 

Outstanding Salaries

6,000

Cash at Bank

1,40,500

Creditors

63,000

Building

90,000

Capital:

 

Stock

40,000

 

A

1,00,000

 

Less: Depreciation @ 20%

8,000

32,000

B

75,000

 

Debtors

30,000

 

C

50,000

2,25,000

Less: Provision for Doubtful Debts

2,500

27,500

 

 

Trade Marks

8,000

 

 

 

Less: Written off

4,000

4,000

 

 

 

 

 

2,94,000

 

2,94,000

 

 

 

 

 

Working Notes:

WN1: Calculation of Sacrificing Ratio:

WN2: Calculation of Goodwill:

C's Share of Goodwill:

WN3: Distribution of General Reserve:

WN4: Adjustment of Capital:

WN5: Bank Account:

Bank Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

 

 

 

 

Balance b/d

5,000

Capital A/c

 

Capital A/c

 

A

7,000

 

A

37,300

 

B

3,000

10,000

B

39,200

 

Balance c/d

1,40,500

C

50,000

1,25,500

 

 

Premium for Goodwill

20,000

 

 

 

1,50,500

 

1,50,500

 

 

 

 

  • 8

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