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12th | Death Of A Partner | Question No. 26 To 30 | Ts Grewal Solution 2023-2024

Question 26: Karim, Saleem and Raheem were partners in a firm sharing profits and losses in the ratio of 3:4:3. The firm closes its books on 31st March every year. On 1st October, 2019, Karim died. On Karim’s death, the goodwill of the firm was valued at `3,50,000. Karim’s share in the profits of the firm in the year of his death was to be calculated on the basis of average profits of last four years. The profits for the last four years were 2015-16- `1,70,000; 2016-17- `1,30,000;2017-18- `1,90,000 and 2018-19- `1,10,000. The total amount payable to Karim’s executors on his death was `7,35,000. It was paid on 15th October, 2019.


Pass necessary Journal entries for the above transactions in the books of the firm. (CBSE 2020)

 

Answer:                  


Date

Particulars

 

L.F.

(Dr.) `

(Cr.) `

 

Saleem’s capital A/c

Raheem’s capital A/c

  To Kareem’s capital A/c

(Being Kareem’s Sacrifice compensated)

Dr.

Dr.

Dr.

 

60,000

45,000

 

 

 

1,05,000

 

P&L Suspense  A/c

  To Kareem’s capital A/c

(Being Profit transferred to capital accounts till the date death)

Dr.

 

22,500

 

22,500

 

Kareem’s capital A/c

  To Kareem’s Executor’s A/c

 (Being Kareem’s capital A/c has been transferred Kareem’s Executor’s A/c)

Dr.

 

 

7,35,000

 

7,35,000

 

Working notes:

WN-1 Calculation of goodwill

The goodwill of the firm was valued at ` 3,50,000

Karim’s Share of Goodwill = 3,50,000×3/10 = ` 1,05,000

Goodwill Share of Karim is in Goodwill will be compensated by Saleem and Raheem in 4:3

Saleem = 1,05,000× 4/7 = 60,000

Raheem = 1,05,000× 3/7 = 45,000

 

WN-2 Karim’s share of Profit till the date of death

The average profits = 1,70,000+1,30,000+1,90,000 +1,10,000/4=1,50,000

Karim’s share of Profit = ` 1,50,000×3×6/10×12=22,500

 

Question 27: The Balance sheet of Sadhu, Raja and Karan who were sharing profits in the ratio of 4:2:4  as at 31st March, 2023 was as follows:


Balance sheet

Assets

 

`

Liabilities

`

Bill Payables

 

20,000

Cash

26,000

Loan

 

22,000

Stock

64,000

General Reserve

 

10,000

Investments

85,000

Capital A/cs:

 

 

Land and building

97,000

Sadhu

80,000

 

Sadhu’s Loan

20,000

Raja

60,000

 

 

 

Karan

1,00,00

2,40,000

 

 

 

 

2,92,000

 

2,92,000

 

Sadhu died on 31st July, 2023. The Partnership Deed provided for the following on the death of a partner:

(i) Goodwill of the firm be valued at two years’s purchase of average profits for the last three years.

(ii) Sadhu’s share of profit or loss till the date of his death was to be calculated on the basis of sales. Sales for the year ended 31st March, 2023 amounted to  ` 4,50,000 and that from 1st April to 31st July, 2023 ` 2,70,000. The profit for the year ended 31st March, 2021 was calculated as ` 1,25,000.

(iii) Interest on capital was to be provided @ 5% p.a.

(iv) The average profits of the last three years were ` 55,000.

Prepare Sadhu’s Capital Account to be rendered to his executor. (Delhi 2013, Modified)

 

Answer:


Sadhu’s Capital Account

Particulars

Dr. `

Particulars

Cr. `

To Sadhu’s loan A/c

20,000

By Balance b/d

80,000

To Sadhu’s Executors A/c

1,39,240

By Gerneral reserve A/c

4,000

 

 

By Raja’s Capital A/c (WN-1)

14,667

 

 

By Karan’s Capital A/c (WN-1)

29,333

 

 

By P&L Suspense A/c

30,240

 

 

By Interest on Capital A/c

1,000

 

 

 

 

 

1,59,240

 

1,59,240

 

Working notes:

 

WN-1 Calculation of goodwill

The average profits of the last three years were ` 55,000

Goodwill of the Firm = ` 55,000×2=1,10,000

Share of Sadhu is in Goodwill = 1,10,000 × 4/10 = 44,000

 

Goodwill Share of Sadhu is in Goodwill will be compensated by Raja and Karan in 2:4

Raja = 44,000 × 2/6 = 14,667

Karan = 44,000 × 4/6 = 29,333

 

WN-2 Interest on capital was to be provided @ 5% p.a.

Sadhu’s Interest on Capital = 80,000×5×4/100×12= 1,333

 

WN-3 Calculation of Sadhu’s share of Profit

Sales for the year ended 31st March, 2021 = ` 4,50,000

The profit for the year ended 31st March, 2021 = ` 1,25,000.

Percentage of Profit for the year ended 31st March, 2021 = 1,25,000×100/4,50,000= 28%

Sales from 1st April to 31st July, 2021 = ` 2,70,000

Profit from 1st April to 31st July, 2021 = ` 2,70,000×28/100= ` 75,600

Sadhu’s Share of Profit = 75,600×28×4/100×10 = ` 8,467

 

Question 28:


X and Y are partners. The Partnership Deed provides inter alia:
(a) That the Accounts be balanced on 31st March every year.
(b) That the profits be divided as: X one-half, Y one-third and carried to a Reserve one-sixth.
(c) That in the event of the death of a partner, his Executors be entitled to be paid:
    (i) The Capital to his credit till the date of death.
    (ii) His proportion of profits till the date of death based on the average profits of the last three completed years.
    (iii) By way of Goodwill, his proportion of the total profits for the three preceding years.
(d)

BALANCE SHEET as at 31st March, 2022

Liabilities

 `

Assets

 `

Capital A/cs:

 

Sundry Assets

21,000

 X

9,000

 

 

 

 Y

     6,000

 15,000

 

   

Reserve

 

3,000

 

 

 

Creditors

3,000

 

 

 

 

 

 

 

21,000

 

21,000

 

 

 

 


Profits for three years were: 2020  ` 4,200; 2021 −
 ` 3,900; 2022 −  ` 4,500.

Y died on 1st August, 2022. Prepare necessary accounts.

 

Answer:


Y’s Capital Account

Dr.

 

Cr.

Particulars

 ( `)

Particulars

 ( `)

 

 

Balance b/d

6,000

 

 

X’s Capital A/c (Reserve)

1,200

Y’s Executor’s A/c

12,800

X’s Capital A/c (Goodwill)

5,040

 

 

X’s Capital A/c (Profit)

560

 

12,800

 

12,800

 

 

 

 


Working Notes:

WN 1
Old Ratio (X and Y) = 1/2 : 1/3 or     3:2

WN 2
Y’s share of reserve =3,000×2/5=1,200

WN 3 Calculation Y’s Share of Profit 
Average profit = total profit of past given years/number of years

Average profit =4200+3900+4500/3=12600/3=4,50

Y’s Share of Profit (from April 01,2021 to August 01, 2022 ) 4,200×2/5×4/12=560

WN 4 Calculation of Y’s Share of Goodwill 
Y’s share of Goodwill = Y’s Profit Share in last three year
Profit for last three years = 4,200 + 3,900 + 4,500 =
` 12,600
Y’s Share of Goodwill=12,600×2/5=5040

 

Question 29: A, B were partners in a firm. A died on 31sth March, 2018 and the Balance sheet of the firm on that date was as under:


Balance sheet as at 31st March, 2018

Assets

 

`

Liabilities

`

Bill Payables

 

7,000

Cash at bank

12,000

Loan

 

9,000

Debtors

32,000

General Reserve

 

10,000

Furniture

30,000

Profit and Loss Account

 

6,000

Plant

40,000

Capital A/cs:

 

 

Patents

8,000

Sadhu

40,000

 

 

 

Raja

30,000

 

 

 

Karan

20,000

90,000

 

 

 

 

1,22,000

 

1,22,000

On A’s death it was found that patents were valueless, furniture was to be brought down to ` 24,000, plant was to be reduced by ` 10,000 and there was a liability of ` 7,000 on account of workmen’s compensation.

Pass the necessary Journal entries for the above at the time of A’s death. (CBSE 2019)

 

Answer:


Date

Particulars

 

L.F.

(Dr.) `

(Cr.) `

 

Patent A/c

Furniture A/c

Plant A/c

  To Revaluation a/c

(Being Values of Fixed assets decreased)

Dr.

Dr.

Dr.

 

8,000

6,000

10,000

 

 

 

24,000

 

Revaluation A/c

   To A’s capital A/c

   To B’s capital A/c

   To C’s capital A/c

(Being Loss on Revaluation transferred to capital accounts)

Dr.

 

24,000

 

8,000

8,000

8,000

 

General Reserve A/c

   To A’s capital A/c

   To B’s capital A/c

   To C’s capital A/c

(Being General Reserve transferred to capital accounts)

Dr.

 

 

9,000

 

3,000

3,000

3,000

 

Workers’ Compensation Reserve A/c

  To workers’ Compensation Claim A/c

  To A’s capital A/c

  To B’s capital A/c

  To C’s capital A/c

(Being Workers’ Compensation Reserve transferred to capital accounts after adjusting Claim)

Dr.

 

 

10,000

 

7,000

1,000

1,000

1,000

 

 

 

Profit and Loss  A/c

   To A’s capital A/c

   To B’s capital A/c

   To C’s capital A/c

Dr.

 

 

6,000

 

2,000

2,000

2,000

 

  A’s capital A/c

     To  A’s Executors’ A/c

 

Dr.

 

 

38,000

 

38,000

 

Question 30: Shirish, Harit and Asha were partners in a firm sharing profits in the ratio of 5:4:1. Shirish died on 30th June, 2018. On this date, their Balance Sheet was follows:


Balance sheet of Shirish,  Harish, Asha as at 31st March, 2018

Assets

 

`

Liabilities

`

Capital A/cs:

 

 

Plant and Machinery

5,60,000

Shirish

1,00,000

 

Stock

90,000

Harit

2,00,000

 

Debtors

10,000

Asha

3,00,000

6,00,000

Cash

40,000

Profits for the year 2017-18

 

80,000

 

 

Bills Payable

 

20,000

 

 

 

 

7,00,000

 

7,00,000

 

 

 

 

 

According to the Partnership Deed, in addition to deceased partner’s capital, his executor is entitled to:

(i) Share in profits in the year of death on the basis of average of last two years profit. Profit for the year 2016-17 was 60,000.

(ii) Goodwill of the firm was to be valued at 2 years purchase of average of last two years’ profits.

Prepare Shirish’s Capital Account to be presented to his executor. (CBSE 2019)

 

Answer:


Shirish’s Capital Account

Particulars

Dr. `

Particulars

Cr. `

To Sadhu’s Executors A/c

2,18,750

By Balance b/d

1,00,000

 

 

By P&L Suspense A/c (WN-1)

    8,750

 

 

By Manish’s Capital A/c (WN-2)

56,000

 

 

By Asha’s Capital A/c (WN-2)

14,000

 

 

By P&L Appropriation A/c(WN-3)

40,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,18,750

 

2,18,750

Working notes:

WN-1 Calculation of Sadhu’s share of Profit

Average Profit of last two years= 80,000+60,000/2=70,000

Shirish’s Share of Profit = 70,000×5×3/10×12 = ` 8,750

 

WN-2 Calculation of goodwill

The average profits of the last two years were ` 70,000

Goodwill of the Firm = ` 70,000×2=1,40,000

Share of Shirish is in Goodwill = 1,40,000 × 5/10 = 70,000

Goodwill Share of Shirish is in Goodwill will be compensated by Harish and Asha in 4:1

Harish = 70,000 × 4/5 = 56,000

Asha = 70,000 × 1/5 = 14,000

 

WN-3 Calculation of Sadhu’s share of undistributed Profits for the year 2017-18

Shirish’s Share of Profit = 80,000×5/10 = ` 40,000

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 6 – Death of a Partner

 

Question No. 1 To 5

Question No. 6 To 10

Question No. 11 To 15

Question No. 16 To 20

Question No. 21 To 25

Question No. 26 To 30

Question No. 31 To 35

Question No. 36 And 37