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12th | Death Of A Partner | Question No. 31 To 35 | Ts Grewal Solution 2023-2024

Question 31:


On 31st March, 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were partners in a firm was as under:

Liabilities

 ( `)

Assets

 ( `)

Sundry Creditors

2,50,000

Building

2,60,000

Reserve Fund

2,00,000

Investment

1,10,000

Capital A/csPooja

1,50,000

 

Qureshi's Loan

1,00,000

                     Qureshi

1,00,000

 

Debtors

1,50,000

                     Ross

1,00,000

3,50,000

Stock

1,20,000

 

 

 

Cash

60,000

 

8,00,000

 

8,00,000

 

 

 

 

   
Qureshi died on 1st July, 2014. The profit-sharing ratio of the partners was 2 : 1 : 1. On the death of a partner, the partnership deed provided for the following:
(i) His share in the profits of the firm till the date of his death will be calculated on the basis of average profits of last three completed years.
(ii) Goodwill of the firm will be calculated on the basis of total profit of last two years.
(iii) Interest on loan given by the firm to a partner will be charged at the rate of 6% p.a. or  ` 4,000, whichever is more.
(iv) Profits for the last three years were  ` 45,000; 
` 48,000 and  ` 33,000.
Prepare Qureshi's Capital Account to be rendered to his executors.

 

Answer:


Dr.

Qureshi’s Capital A/c

Cr.

Date

Particulars

 ( `)

Date

Particulars

 ( `)

2014

 

 

2014

 

 

July 01

To Qureshi’s Loan A/c (WN3)

1,04,000

April 01

By balance b/d

1,00,000

2015

 

 

July 01

By Pooja’s Capital A/c (WN1)

13,500

March 31

To balance c/d

68,875

July 01

By Ross’s Capital A/c (WN1)

6,750

 

 

 

July 01

By Profit & Loss Suspense A/c (WN2)

2,625

 

 

 

July 01

By Reserve Fund A/c

50,000

 

 

 

 

(2,00,000 × 1/4)

 

 

 

1,72,875

 

 

1,72,875

 

 

 

 

 

 

 
Working Notes:                              
1. Calculation of Qureshi’s Share of Goodwill

Goodwill

=

 ` (48,000 + 33,000) =  ` 81,000

Qureshi’s Share of Goodwill

=

 ` (81,000 × 1/4) =  ` 20,250

Gaining Ratio

=

Pooja : Ross = 2 : 1

Amount debited to Pooja’s Capital A/c

=

 ` (20,250 × 2/3) =  ` 13,500

Amount debited to Ross’s Capital A/c

=

 ` (20,250 × 1/3) =  ` 6,750


2. Calculation of Qureshi’s Share of Loss till the date of his death

Average Profit of the last three years

=

 ` (45,000 + 48,000 + 33,000)/3 =  ` 42,000

Qureshi’s share of loss till the date of death

=

Previous year’s loss × Qureshi’s Share of Loss × Months till the date of his death/12

 

=

 ` (42,000 × 1/4 × 3/12)

 

=

 ` 2,625


3. Calculation of Amount due on account of Loan given to Qureshi

Loan given to Qureshi by a firm

=

 ` 1,00,000

Amount of interest till 1st July, 2014

=

 ` (1,00,000 × 6/100 × 3/12) =  ` 1,500

Total Amount due to firm on 1st July

=

Loan amount + Amount of Interest

 

=

 ` (1,00,000 + 4,000)=  ` 1,04,000                              

[As 4,000 > Amount of Interest]

Question 32: The Balance Sheet of A, B and C who were sharing profits in the ratio of 3:3 :4 as at 31st March, 2019 was as follows:


BALANCE SHEET OF A, B AND C as at 31th March, 2019

Assets

 

`

Liabilities

`

General Reserve

 

40,000

Cash

4,000

Bills Payable

 

15,000

Stock

43,000

Loan from Bank

 

30,000

Investment

70,000

Capital A/cs:

 

 

Land and Buildings

1,58,000

A

60,000

 

 

 

B

90,000

 

 

 

C

40,000

1,90,000

 

 

 

 

2,75,000

 

2,75,000

A died on 1st October, 2019. The partnership deed provided for the following on the death of a partner:

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

(b) The profit for the year ending 31st March, 2019 was ` 50,000.

(c) Interest on capital was to be provided @ 6% p.a.

(d) The average profits of the last three years were ` 35,000.

Prepare A’s Capital Account to be rendered to his executors. (CBSE 2020 C)

 

Answer:                   


A’s Capital Account

Particulars

Dr. `

Particulars

Cr. `

To Sadhu’s Executors A/c

1,02,300

By Balance b/d

60,000

 

 

By General Reserve A/c (WN-1)

12,000

 

 

By B’s Capital A/c (WN-2)

9,000

 

 

By C’s Capital A/c (WN-2)

12,000

 

 

By Interest on Capital A/c (WN-3)

1,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,02,300

 

1,02,300

Working notes:

WN-1 A’s share of General Reserve

A’s Share of Profit = 40,000×3/10 = ` 12,000

 

WN-2 Calculation of goodwill

The average profits of the last three years were ` 35,000

Goodwill of the Firm = ` 35,000×2=70,000

Share of A is in Goodwill = 70,000 × 3/10 = 21,000

Goodwill Share of A is in Goodwill will be compensated by B and C in 3:4

A = 21,000 × 3/7 = 9,000

B = 21,000 × 4/7 = 12,000

 

WN-3 Calculation of Interest on Capital

A’s Interest on Capital till the date of death = 60,000×6×6/100×12=1,800

 

Question 33:


The Balance Sheet of X, Y and Z as at 31st March, 2023 was:
 

Liabilities

 ( `)

Assets

 ( `)

Bills Payable

2,000

Cash at Bank

5,800

Employees' Provident Fund

5,000

Bills Receivable

800

Workmen Compensation Reserve

6,000

Stock

9,000

General Reserve

6,000

Sundry Debtors

16,000

Loans

7,100

Furniture

2,000

Capital A/cs:

 

Plant and Machinery

6,500

X

22,750

 

Building

30,000

Y

15,250

 

Advertising Suspense

6,000

Z

12,000

50,000

 

 

 

76,100

 

76,100

 

 

 

 

   
The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2023. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 2023: 
` 24,000; 2022:  ` 16,000; 2021:  ` 20,000 and 2020:  ` 10,000 and 2019:  ` 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock  ` 10,000; Debtors 
` 15,000; Furniture  ` 1,500; Plant and Machinery  ` 5,000; Building  ` 35,000. A Bill Receivable for  ` 600 was found worthless.
(d) A Sum of 
` 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.

 

Answer:


Journal

Particulars

L.F.

Debit

`

Credit

`

Workmen’s Compensation Reserve

Dr.

 

6,000

 

To X’s Capital A/c

 

 

3,000

To Y’s Capital A/c

 

 

2,000

To Z’s Capital A/c

 

 

1,000

(Workmen’s Compesation Reserve distributed among partners in their old ratio)

 

 

 

 

 

 

 

General Reserve A/c

Dr.

 

6,000

 

To X’s Capital A/c

 

 

3,000

To Y’s Capital A/c

 

 

2,000

To Z’s Capital A/c

 

 

1,000

(General Reserve distributed among partners in their old ratio)

 

 

 

 

 

 

 

X’s Capital A/c

Dr.

 

3,000

 

Y’s Capital A/c

Dr.

 

2,000

 

Z’s Capital A/c

Dr.

 

1,000

 

To Advertisement Suspense A/c

 

 

6,000

(Advertisement suspense written off among partners in their old ratio)

 

 

 

 

 

 

 

X’s Capital A/c

Dr.

 

4,500

 

Y’s Capital A/c

Dr.

 

3,000

 

To Z’s Capital A/c

 

 

7,500

(Z’s share of goodwill adjusted)

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

3,600

 

  To Sundry debtors A/c

Dr.

 

 

1,000

To Furniture A/c

 

 

500

To Plant and Machinery A/c

 

 

1,500

To Bills Receivable A/c

 

 

600

(Decrease in value of Assets transferred to Revaluation Account)

 

 

 

 

 

 

 

Stock A/c

Dr.

 

1,000

 

Building A/c

Dr.

 

5,000

 

To Revaluation A/c

 

 

6,000

(Increase in value of Assets transferred to Revaluation Account)

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

2,400

 

To X’ Capital A/c

 

 

1,200

To Y’s Capital A/c

 

 

800

To Z’s Capital A/c

 

 

400

(Revaluation profit distributed among partners in their old ratio)

 

 

 

 

 

 

 

Profit and Loss Suspense A/c

Dr.

 

1,333

 

To Z’s Capital A/c

 

 

1,333

(Z’s share of profit transferred his capital account)

 

 

 

 

 

 

 

Z’s Capital A/c

Dr.

 

22,233

 

  To Z’s Executor’s A/c

 

 

22,233

(Amount due to Z transferred to his Executor’s Account)

 

 

 

 

 

 

 

Z’s Executor’s A/c

Dr.

 

12,333

 

To Bank A/c

 

 

12,333

(Amount paid to Z’s Executor)

 

 

 

 

 

 

 

 

Z’s Executor’s Account

Dr.

 

Cr.

Date

Particulars

`

Date

Particulars

`

2021

 

 

2021

 

 

July 31

Bank A/c

12,233

July 31

Z’s Capital A/c

22,233

2022

 

 

2022

 

 

Mar. 31

Balance c/d

10,667

Mar. 31

Interest (10,000 × 10% for 8 months)

667

 

 

22,900

 

 

22,900

2022

 

 

2022

 

 

July 31

Bank A/c (5,000 + 667 + 333)

6,000

Apr. 01

Balance b/d

10,667

 

 

 

July 31

Interest (10,000 × 10% for 4 months )

333

2023

 

 

2023

 

 

Mar.31

Balance c/d

5,333

Mar. 31

Interest (5,000 × 10% for 8 months)

333

 

 

11,333

 

 

11,333

2023

 

 

2023

 

 

July 31

Bank A/c (5,000 + 333 + 167)

5,500

Apr. 01

Balance b/d

5,333

 

 

 

July 31

Interest (5,000 × 10% for 4months)

167

 

 

5,500

 

 

5,500

 

 

 

 

 

 


Working Notes:

WN1 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

Average profit = total profit of past given years/number of years

Average profit =24,000+16,000+20,000+10,000+5000/5=15,000

Goodwill = Average Profit × Number of Years’ Purchase

                   = 15,000 × 3 =
` 45,000

WN2 Adjustment of Goodwill

Old Ratio = 3 : 2 : 1

Z died.

New Ratio (X and Y) = 3 : 1 and

Gaining Ratio = 3 : 2

Z’s Share in Goodwill = 45,000×1/6=7,500

This share of goodwill is to be distributed between X and Y in their gaining ratio (i.e. 3 : 1).

X’s Share of Goodwill = 7,500×3/5=4,500

Y’s Share of Goodwill = 7,500×2,5=3,000



WN3 Calculation Z’s Share of Profit

Profit for 2021 (Immediate Previous Year) =
` 24,000

Z’s Profit Share = 24,000×1/6×4/12=1,333


WN4
 

Revaluation Account

Dr.

 

Cr.

Particulars

`

Particulars

`

Sundry Debtors

1,000

Stock

1,000

Furniture

500

Building

5,000

Plant and Machinery

1,500

 

 

Bills Receivable

600

 

 

Profit transferred to:

 

 

 

X’s Capital A/c

1,200

 

 

 

Y’s Capital A/c

800

 

 

 

Z’s Capital A/c

400

2,400

 

 

 

6,000

 

6,000

 

 

 

 

 

Question 34:


X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2022, their Balance Sheet was as follows:
  

Liabilities

 ( `)

Assets

 ( `)

Trade Creditors

1,20,000

Cash at Bank

1,80,000

Bills Payable

80,000

Stock

1,40,000

General Reserve

60,000

Sundry Debtors

80,000

Capital A/cs:

 

Building

3,00,000

  X

7,00,000

 

Advance to Y

7,00,000

  Y

7,00,000

 

Profit and Loss A/c

3,20,000

  Z

60,000

14,60,000

 

 

 

17,20,000

 

17,20,000

 

 

 

 

   
Y died on 30th June, 2022. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2022, 31st March, 2021, 31st March, 2020, 31st March, 2019 and 31st March, 2018 were 
` 3,20,000 (Loss);  ` 1,00,000;  ` 1,60,000;  ` 2,20,000 and  ` 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2021 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2021.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors. 

 

Answer:


Y’s Capital  Account

Dr.

 

Cr.

Particulars

`

Particulars

`

Profit & Loss A/c

1,28,000

Balance b/d

7,00,000

Profit & Loss Suspense (Share of Loss)

32,000

General Reserve

24,000

Advance to Y
 

7,00,000

X’s Capital A/c
Z ’s Capital A/c

64,000
32,000

 

 

Y’s Executors A/c

40,000

 

 

 

 

 

8,20,000

 

8,20,000

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Calculation of Share in General Reserve

Reserve=60,000×2/5=
` 24,000


WN2: Calculation of Share in Goodwill

Goodwill=Average Profit×No. of years' Purchase=1,20,000×2=
` 2,40,000

Y's share in Goodwill=2,40,000×2/5=` 96,000, should be contributed by X & Z in 2:1

Average Profit=Total Profits of past years given/Number of year =1,00,000+1,60,000+2,20,000+4,40,000−3,20,000/5=` 1,20,000


WN3: Calculation of Profit & Loss Suspense


Profit & loss Suspense (Loss)=3,20,000×2×3/5×12=` 32,000

Question 35: Arun, Bhim and Nakul are partners in a firm sharing profits in the ratio of 1: 1:3. Their Capital Accounts showed the following balances on 1st April, 2020:


Arun- ` 2,00,000; Bhim- ` 1,50,000 and Nakul- ` 4,50,000.

Firm closes its accounts every year on 31st March. Bhim died on 31st March, 2021. In the event of death of any partner, the Partnership provides for the following:

(i) Interest on capital will be allowed to deceased partner only from the first of day of the accounting year till the date of his death @10% p.a.

(ii) The deceased partner’s share in the Goodwill of the firm will be calculated on the basis of 2 years’ purchase of the average profit of the last three years. The profits of the firm for the last three years ended 31st March, were: 2019- ` 90,000; 2020 ` 2,00,000 and 2021- ` 1,60,000.

(iii) His share of Profits till the Date of Death: The profit of the firm for the year ended 31st March, 2021 was ` 1,60,000 before providing for interest on capital. Bhim’s Executor was paid the sum due in two equal annual instalments with interest @ 10% p.a.

Prepare Bhim’s Capital Account as on 31st March, 2021 to be presented to his executor and his Executor’s Loan Account for the year ending 31st March, 2022 and 31st March, 2023.

 

Answer:


Bhim’s Capital Account

Particulars

Dr. `

Particulars

Cr. `

To Bhim’s Executors A/c

2,54,000

By Balance b/d

1,50,000

 

 

By B’s Capital A/c

(WN-2)

15,000

 

 

By C’s Capital A/c

(WN-2)

45,000

 

 

By Interest on Capital A/c (WN-3)

15,000

 

 

By P&L Suspense A/c

29,000

 

 

 

 

 

2,54,000

 

2,54,000


Working notes:

WN-1 Calculation of goodwill

Average Profit = 90,000+2,00,000+1,60,000/3=1,50,000

Firm’s Goodwill = 1,50,000 × 2=3,00,000

Bhim’s Share of Goodwill = 3,00,000×1/5 = ` 60,000

Goodwill Share of Bhim’s is in Goodwill will be compensated by Arun and Nakul in 1:3

Arun = 1,05,000× 1/4 = 15,000

Nakul = 1,05,000× 3/4 = 45,000

 

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

Interest on Capital = 1,50,000×10/100=15,000

Profit After Interest on Capital = 1,60,000-15,000 =1,45,000

Bhim’s share of Profit = ` 1,45,000×1/5=29,000

 

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