Q. The Balance Sheet of A and B as on 31st December is below. They share profit and losses in the ratio 2 : 1. 
Liabilities Rs. Assets Rs.
A's Capital 
B's Capital 
General Reserve 
Creditors 
Employees compensation fund 
Provision for Doubtful debts 
30,000
30,000 
24,000 
16,000 
12,000 
10,000 
Freehold property 
Furniture 
Stock 
Debtors 
Cash 
Profit & Loss A/c
20,000
 6,000 
12,000 
60,000 
 8,000 
 6,000
  1,22,000    1,22,000 

C is a student from the tribal region of Western Ghats Hills. He completed his MBA and speicalised Marketing. So A and B decided to admit C into the firm from 1. 1 .2016 subject to the following terms and conditions : 
1. C will bring in propionate capital for 1/4th share and required amount of goodwill. 
2. Goodwill should be valued at 2 years purchase of 3 years average profits or losses of the previous years: NP 2012 Rs. 24,000, NP Rs. 2013 Rs. 36,000, NP 2014 Rs. 60,000
3. Depreciation is to be provided on furniture at  10% and property at 15% 
4. Stock is to be revalued at Rs. 10,500.
5. Mohan, a debtor whose account written off the from the books paid Rs. 1,100. 
6. Provision for doubtfui debts should be maintained at 10 % on Debtors. 
Prepare revaluation account and capital accounts of the partners and Balance sheet. 
Comment on the old partners intention of taking C as partner in the firm.
 

Dear Student,
 
Revaluation Account
Dr.   Cr.
Particulars Amount
Rs
Particulars Amount
Rs
Furniture 600 Bad-Debts Recovered 1,100
Property 3,000 Provision for DD 4,000
Stock 1,500    
       
  5,100   5,100
       
 
Dr. Partners’ Capital Accounts Cr.
Particulars A B C Particulars A B C
P&L A/c 4,000 2,000   Balance b/d 30,000 30,000  
Balance c/d 60,000 45,000 35,000 Cash A/c     35,000
        Premium for Goodwill A/c 10,000 5,000  
        WCF A/c 8,000 4,000  
        General Reserve A/c 16,000 8,000  
  64,000 47,000 35,000   64,000 47,000 35,000
               
 
Balance Sheet
Liabilities Amount
Rs
Assets Amount
Rs
Creditors 16,000 Cash 69.100
Capital A/c   Debtors 60,000
A 60,000   Stock 10,500
B 45,000   Freehold Property 17,000
C 35,000 1,40,000 Furniture 5,400
Provision 6,000    
  1,62,000   1,62,000
       

Working Notes:

Calculation of Goodwill

Goodwill equals Average space Profits cross times Number space of space Years apostrophe space Purchase Average space Profits equals fraction numerator 36 comma 000 plus 60 comma 000 minus 6 comma 000 over denominator 3 end fraction equals 30 comma 000 Goodwill equals 30 comma 000 cross times 2 equals 60 comma 000 straight C apostrophe straight s space share equals 60 comma 000 cross times 1 fourth equals 15 comma 000 space left parenthesis to space be space credited space to space straight A & straight B space in space 2 colon 1 right parenthesis

Calculation of C's Capital

A's Adjusted Capital = Total of Dr- Total of Cr.
                                  = 64,000 - 4,000 = 60,000

B's Adjusted Capital = Total of Dr- Total of Cr.
                                  = 47,000 - 2,000 = 45,000

Total Adjusted Capital (of A&B) = 1,05,000

Firm apostrophe straight s space Capital equals 1 comma 05 comma 000 cross times 4 over 3 equals 1 comma 40 comma 000 straight C apostrophe straight s space Capital equals 1 comma 40 comma 000 cross times 1 fourth equals 35 comma 000
 

  • -1
What are you looking for?