12th | Admission of a Partner | Question No.  81 To 83 | Ts Grewal Solution 2022-2023

The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 : 1, as on 1st April, 2022 is as follows:                      

Liabilities		`	Assets	`
Capital A/cs:			Y's Current Account	7,000
X	1,75,000		Land and Building	1,75,000
Y	1,50,000		Plant and Machinery	67,500
Z	1,25,000	4,50,000	Furniture	80,000
Current A/cs:			Investments	36,500
X	4,000		Bills Receivable	17,000
Z	6,000	10,000	Sundry Debtors	43,500
General Reserve		15,000	Stock	1,37,000
Profit and Loss A/c		7,000	Bank	43,500
Creditors		80,000
Bills Payable		45,000
		6,07,000		6,07,000

On the above date, W is admitted as a partner on the following terms:

(a) W will bring    ` 50,000 as his capital and get 1/6th share in the profits.
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at ` 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of    ` 7,004 will be created against bills receivable discounted earlier but now dishonored.
(e) The value of stock, furniture and investments is reduced by 20%, whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital Accounts of the partners will be adjusted on the basis of W's Capital through their Current Accounts.
Prepare Revaluation Account, Partners' Current Accounts and Capital Accounts.

 

Revaluation Account
Dr.						Cr.
Particulars		`	Particulars		`
Stock		27,400	Land and Building		35,000
Furniture		16,000	Plant and Machinery		6,750
Investments		7,300	Loss transferred to:
			X	4,475
			Y	2,983
			Z	1,492	8,950
		50,700			50,700

 

Partners’ Current Account
Dr.				Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Balance b/d		7,000		Balance b/d	4,000		6,000
Revaluation (Loss)	4,475	2,983	1,492	General Reserve	7,500	5,000	2,500
				Profit and Loss A/c	3,500	2,333	1,167
Balance c/d	100,525	47,350	83,175	Premium for Goodwill	15,000
				Capital A/c	75,000	50,000	75,000
	1,05,000	57,333	84,667		1,05,000	57,333	84,667

 

Partners’ Capital Account
Dr.					Cr.
Particulars	X	Y	Z	W	Particulars	X	Y	Z	W
Current A/c	75,000	50,000	75,000		Balance b/d	1,75,000	1,50,000	1,25,000
					Cash A/c				50,000
Balance c/d	1,00,000	1,00,000	50,000	50,000
	1,75,000	1,50,000	1,25,000	50,000		1,75,000	1,50,000	1,25,000	50,000

 

Working Notes:

WN1Calculation of Sacrificing Ratio

Old Ratio=3 : 2 : 1

New Ratio=2 : 2 : 1 : 1

Sacrificing Ratio=Old Ratio-New Ratio

X=3/6-2/6=1/6

Y=2/6-2/6=Nil

Z=1/6-1/6=Nil

Here, only X has sacrificed.
 

WN2 Distribution of Goodwill

W's Share of Goodwill=90,000×16=   ` 15,000

As only X has sacrificed his share, therefore, he will get    ` 15,000
 

WN3 Adjustment of Capital

Total Capital of the firm=W's Capital×Reciprocal of his share        

=50,000×6/1=   ` 3,00,000

New Profit Sharing Ratio=2 : 2 : 1 : 1

X's New Capital=3,00,000×2/6=   ` 1,00,000

Y's New Capital=3,00,000×2/6=   ` 1,00,000

Z's New Capital=3,00,000×1/6=   ` 50,000

W's New Capital=3,00,000×1/6=   ` 50,000

 

BALANCE SHEET OF A AND B as at 31st March, 2018
Liabilities		`	Assets		`
Capitals:			Cash		8,000     36,000 60,000 6,000 76,000 1,40,000 20,000
A B	1,04,000 52,000	1,56,000	Sundry Debtors Less: Provision for Doubtful Debts	37,600 1,600
Creditors Employees' Provident Fund Workmen Compensation Fund Contingency Reserve		1,54,000 16,000 10,000 10,000	Stock Prepaid Insurance Plant and Machinery Building Furniture
		3,46,000			3,46,000

C was admitted as a new partner and brought 64,000 as capital and 15,000 for his share of goodwill premium.

The new profit-sharing ratio was 5 : 3 :2. On C's admission the following was agreed upon:

(i) Stock was to be depreciated by 5%.

(ii) Provision for doubtful debts was to be made at `2,000.

(iii) Furniture was to be depreciated by 10%.

(iv) Building was valued at `1,60,000.

(v) Capitals of A and B were to be adjusted on the basis of C's capital by bringing or paying of cash as the case may be.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of reconstituted firm. (CBSE 2019)

 

Revaluation Account
Dr.											Cr.
Particulars						`			Particulars		`
To Stock To Provision for D.D. To Furniture To Profit transferred to						3,000 400  2,000			By Building		20,000
A=14,600×3/5=			8,760
B=14,600×2/5=			5,840			14,600
						20,000					20,000
Partners’ Capital Account
Dr.																	Cr.
Particulars		A			B			C		Particulars					A	B	C
Balance c/d		1,32,260			73,340			64,000		Balance b/d					1,04,000	52,000
										Cash A/c							64,000
										Premium for Goodwill					7,500	7,500
										Revaluation A/c (Profit)					8,760	5,840
										Workers’ compensation reserve Contingency reserve					6000 6000	4000 4000
		1,32,260			73,340			64,000							1,32,260	73,340	64,000
Balance c/d		1,60,000			96,000			64,000		Balance b/d Cash A/c					1,32,260 27,740	73,340 22,660	64,000
		1,60,000			96,000			64,000							1,60,000	96,000	64,000
Balance Sheet as on March 31, 2019
Liabilities				`			Assets					`
Creditors				1,54,000			Cash (8,000+64,000+15,000+50,000)					1,87,400
							Debtors                       37,600 Less; Prov. For D.D.     2,000					35,000
Employees Provident Fund				16,000			Stock Prepaid Insurance Plant and Machinery Building					57,000 6,000 76,000 1,60,000
Capital A/cs:							Furniture					18,000
Raghu	1,60,000
Rishu	96,000
Rishabh	64,000			3,20,000
				4,90,000								4,90,000

 

Working notes;

 

WN-1 Calculation of old and sacrificing ratio;

Old ratio of A and B =3:2

New ratio of A:B:C =5:3:2

A=3/5-5/10=6-5/10=1/10

B=2/5-3/10=4-3/10=1/10

Sacrificing ratio of A and B is 1:1

 

WN-2 Calculation of new firm’s capital;

Total capital of new firm on the basis of C’s Capital

C’s capital =64,000

New firm’s total capital=64,000×10/2=`3,20,000

New capital of A,B and C

A= 3,20,000×5/10 = `1,60,000

B= 3,20,000×3/10 =`96,000

C= 3,20,000×2/10 = `64,000

 

 

BALANCE SHEET OF RAMAN AND ROHIT as at 31st March, 2018
Liabilities		`	Assets		`
Capitals: Raman Rohit	1,40,000 1,00,000	240,000 40,000 1,60,000	Plant and Machinery Furniture and Fixtures Stock		1,75,000 65,000 47,000     1,03,000 50,000
Workmen Compensation Fund Creditors			Debtors Less: Provision for Doubtful Debts	1,10,000 7,000
			Bank Balance
		4,40,000			4,40,000

On the above date, Saloni was admitted in the partnership firm. Raman surrendered 2/5th of his share

and Rohit surrendered 1/5th of his share in favour of Saloni. It was agreed that:

(i) Plant and machinery will be reduced by `35,000 and furniture and fixtures will be reduced to `58,500.

(ii) Provision for bad and doubtful debts will be increased by `3,000.

(iii) A claim for `16,000 for workmen's compensation was admitted.

(iv) A liability of `2,500 included in creditors is not likely to arise.

(v) Saloni will bring  `42,000 as her share of goodwill premium and proportionate capital.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm. (CBSE 2019)

 

Answer;

	Revaluation Account
	Dr.								Cr.
	Particulars				`				Particulars							`
	Plant and Machinery				35,000				Creditors							2,500
	Furniture and fixtures				6,500				Loss transferred to;
	Provision of doubtful debts				3,000				Raman’s Capital A/c(42,000×2/3)					28,000
									Rohit’s Capital A/c(42,000×1/3)					14,000		42,000
					44,500											44,500
	Partners’ Capital Accounts
	Dr.																Cr.
	Particulars			Abha		Binay		Chitra		Particulars		Abha			Binay		Chitra
	To Revaluation			28,000		14,000		-		By Balance b/d		140,000			1,00,000		-
	To Balance c/d			1,61,600		1,02,400		-
										By Premium		33,600			8,400		-
										By W.C.F.		16,000			8,000		-
				1,89,600		1,16,400		-				1,89,600			1,16,400		-
	To Balance c/d			1,61,600		1,02,400		1,32,000
										Bank A/c		-			-		1,32,000
				1,61,600		1,02,400		1,32,000				1,61,600			1,02,400		1,32,000
Balance Sheet as on April 31, 2018
Liabilities			`				Assets				`
Creditors			1,57,500				Plant and Machinery Furniture and fixture				1,40,000 58,500
							Stock				47,000
worker compensation liabilities			16,000				Debtors                      1,10,000 Less; Prov. For D.D.     10,000				1,00,000
Capital A/cs:							Cash at Bank				2,24,000
Raman		1,61,600					(50,000+1,32,000+42,000)
Rohit		1,02,400
Saloni		1,32,000	3,96,000
			5,69,500								5,69,500

Working note;

WN-1

Calculation of old and sacrificing ratio

Old ratio Raman: Rohit=2:1

Raman surrenders to Saloni=2/3×2/5=4/15

Rohit surrenders to Saloni=1/3×1/5=1/15

New share of -

Raman=2/3-4/15=10-4/15=6/15

Rohit=1/3-1/15=5-1/15=4/15

Saloni=4/15+1/15+5/15

 

Therefore new ratio of Raman, Rohit and Saloni =6:4:5

Sacrificing ratio= old – new

Raman=2/3-6/15=10-6/15=4/15

Rahit=1/3-4/15=5-4/15=1/15

WN-1

Calculation of Capital of Raman and Rohit=1,61,600+1,02,400=2,64,000

Share of Raman and Rohit=6/15+4/15=6+4/15=10/15

Therefore, Capital of Raman , Rohit and Saloni=2,64,000×15/10=3,96,000

Saloni’s capital=3,96,000×5/15=1,32,000