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

Question 31:


 X, Y and Z were equal partners in a firm. On 31st March, 2023, their Balance Sheet was as follows:

Liabilities

`

Assets

`

Creditors

77,000

Bank

47,000

General Reserve

26,000

Debtors

23,000

Workmen Compensation Reserve

32,000

Stock

1,10,000

 

Capital A/cs:

 

Investments

17,000

X 60,000

 

Furniture

10,000

Y 40,000

 

Machinery

35,000

N 20,000

1,20,000

Profit & Loss A/c

11,000

 

 

Advertisement Suspense A/c

2,000

 

2,55,000

 

2,55,000

On the above date, Z retires from the firm and X and Y decided to share future profits in the ratio of 3 :2 Partners decide to show accumulated profits, losses and reserves in the Balance Sheet of the reconstituted firm at their original values.

Pass an 'Adjustment Entry' for the treatment of accumulated profits, losses and reserves.

Answer:


Date

Particulars

 

Dr. (`)

Cr. (`)

 

X’s Capital A/c

Dr.

12,000

 

 

Y's Capital A/c

Dr.

3,000

 

 

 To Z's Capital A/c

 

 

15,000

 

(Being accumulated profits, losses and reserve adjusted)

 

 

 

Working Note:

Net effect of accumulated profits, losses and reserve

General Reserve

26,000

Workmen Compensation Reserve

32,000

 

58,000

Less:

 

Profit & Loss A/c

11,000

Advertisement Suspense

2,000

 

45,000

Note; Above amount is to be adjusted in Gaining sacrificing ratio

X =

45,000

×

4/15

=

12,000

Y =

45,000

×

1/15

=

3,000

Z =

45,000

×

5/15

=

15,000

 

Gaining sacrificing ratio

 

Old Ratio

-

New ratio

=

(-) Gain/(+) Sacrifice

X =

1/3

-

3/5

=

5-9/15

=

-4/15

Y =

1/3

-

2/5

=

5-6/15

=

-1/15

Z =

1/3

-

0/5

=

5-0/15

=

5/15

 

Question 32:


Partnership Deed of C and D, who are equal partners, has a clause that any partner may retire from the firm on the following terms by giving a six-month notice in writing:
The retiring partner shall be paid−
(a) the amount standing to the credit of his Capital Account and Current Account.
(b) his share of profit to the date of retirement, calculated on the basis of the average profit of the three preceding completed years.
(c) half the amount of the goodwill of the firm calculated at 11/2 times the average profit of the three preceding completed years.
gave a notice on 31st March, 2021 to retire on 30th September, 2021, when the balance of his Capital Account was  ` 6,000 and his Current Account (Dr.) 
` 500. Profits for the three preceding completed years ended 31st March, were: 2019   ` 2,800; 2020 −  ` 2,200 and 2021 −  ` 1,600. What amount is due to as per the partnership agreement? 

 

Answer:


C’s Capital Account

Dr.

 

Cr.

Particulars

`

Particulars

`

C’s Loan A/c

7,700

Balance b/d

6,000

 

 

C’s Current A/c

1,700

 

7,700

 

7,700

 

 

 

 

 

C’s Current Account

Dr.

 

Cr.

Particulars

`

Particulars

`

Balance b/d

500

Profit and Loss Suspense A/c (Share of profit) (WN 1)

550

C’s Capital A/c (balancing figure)

1,700

D’s Current A/c (Share of goodwill) (WN 2)

1,650

 

2,200

 

2,200

 

 

 

 


Working Notes:

WN 1 Calculation of Profit (from April 01, 2021 to Sept. 30, 2021)

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

Average profit =2,800+2,200+1,600/3=2,200

C’s  share of profit (for last 6 month)=Average profit×C’s share×6/12

=2,200×1/2×6/12=550

 

WN 2 Calculation of Goodwill 

Goodwill = Average Profit × 1.5
= 2,200 × 1.5 =
` 3,300
C’s Share of Goodwill =3,300×1/2=1650

 

Question 33:


 Alfa, Beta and Gama are in partnership sharing profits in the ratio of 5:3:2.Their Balance Sheet on 1st April, 2022, the day Beta decided to retire from firm, was as follows:

Liabilities

`

Assets

`

Alfa's Capital

3,00,000

Building

2,50,000

Beta's Capital

2,00,000

Machinery

1,50,000

Gama's Capital

2,00,000

Investments

2.50,000

General Reserve

1,00,000

Debtors

1,00,000

Sundry Creditors

1,00,000

Stock

50,000

 

 

Cash at Bank

1,00,000

 

9,00,000

 

9,00,000

The terms of retirement were:

(i) Beta takes goodwill from Alfa for ` 30,000 and from Gama for ` 40,000 for foregoing his share of profits.

(ii) Stock to be appreciated by 20% and building by 50,000.

(iii) Investments were sold for 2,70,000.

(iv) Beta is paid by bank draft.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

Answer:


Revaluation A/c

Particulars

`

Particulars

`

Gain

 

Building

50,000

Capital A/cs:

 

Investments

20,000

Alfa's 40,000

 

Stock

10,000

Beta's 24,000

 

 

 

Gama's 16,000

80,000

 

 

 

80,000

 

80,000

 

Capital A/c

Particulars

Alfa

Beta

Gama

Particulars

Alfa

Beta

Gama

To Beta's Capital A/c

30,000

-

40,000

By Balance B/d

3,00,000

2,00,000

2,00,000

To Bank A/c

-

3,24,000

-

By Revaluation A/c

40,000

24,000

16,000

To Balance C/d

3,60,000

-

1,96,000

By General Reserve

50,000

30,000

20,000

 

 

 

 

By Alfa's Capital A/c

-

30,000

-

 

 

 

 

By Gama's Capital A/c

-

40,000

-

 

3,90,000

3,24,000

2,36,000

 

3,90,000

3,24,000

2,36,000

 

Balance Sheet

Liabilities

`

Assets

`

Alfa's Capital

3,60,000

Building

3,00,000

Beta's Capital

1,96,000

Machinery

1,50,000

Sundry Creditors

1,00,000

Debtors

1,00,000

 

 

Stock

60,000

 

 

Cash at Bank

46,000

 

 

 

 

 

9,00,000

 

9,00,000

 

Question 34:


Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st March, 2016, their Balance Sheet was as under:

 

 

 

Liabilities

(`)

Assets

(`)

Trade creditors

53,000

Bank

60,000

Employees' Provident Fund

47,000

Debtors

60,000

Kanika's Capital

2,00,000

Stock

1,00,000

Disha's Capital

1,00,000

Fixed assets

2,40,000

Kabir's Capital

80,000

Profit and Loss A/c

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

4,80,000

 

4,80,000

 

 

 

 

 

 

 

 

 

 

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of three completed years preceding the date of retirement. The profits for the year:
      2013-14 were  ` 1,00,000 and for 2014-15 were 
` 1,30,000.
(b) Fixed Assets were to be increased to  ` 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
 Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.  

(AI 2017 C)

 

Answer:


Revaluation Account

Dr.

Cr.

Particulars

`

Particulars

`

Revaluation Profit

 

Fixed Assets

60,000

  Kanika’s Capital

40,000

 

Stock

20,000

  Disha’s Capital

20,000

 

 

 

  Kabir’s Capital

20,000

80,000

 

 

 

80,000

 

80,000

 

 

 

 

 

Partners’ Capital Account 

Dr.

Cr.

Particulars

Kanika

Disha

Kabir

Particulars

Kanika

Disha

Kabir

Profit & Loss A/c

10,000

5,000

5,000

Balance b/d

2,00,000

1,00,000

80,000

Kanika’s Capital A/c

 

35,000

35,000

Disha’s Capital A/c

35,000

 

 

Kanika’s Loan A/c

3,00,000

 

 

Kabir’s Capital A/c

35,000

 

 

Balance c/d

 

80,000

60,000

Revaluation

40,000

20,000

20,000

 

 

 

 

 

 

 

 

 

3,10,000

1,20,000

1,00,000

 

3,10,000

1,20,000

1,00,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2016

Liabilities

 (`)

Assets

 (`)

Employees’ Provident Fund

47,000

Bank

60,000

Trade Creditors

53,000

Sundry Debtors

60,000

Kanika’s Loan A/c

3,00,000

Stock

1,20,000

Capitals

 

Fixed Assets

3,00,000

   Disha

80,000

 

 

 

   Kabir

60,000

1,40,000

 

 

 

5,40,000

 

5,40,000

 

 

 

 


Working Notes:
WN1: Calculation of Goodwill

Goodwill=Average Profits×Number of Years' Purchase

Average Profits=Total ProfitsNumber of Years=1,00,000+1,30,000−20,000/3=2,10,000/3=` 70,000

Goodwill=70,000×2=` 1,40,000

Kanika's share=1,40,000×2/4=70,000 (to be borne by gaining partners in gaining ratio)

Note: Since no information is given about the share of gain, it is assumed that the old partners are gaining in their old profit sharing ratio.

 

Question 35:


N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2016 their Balance Sheet was as under:

Liabilities

 (`)

Assets

 (`)

Creditors

1,65,000

Cash

1,20,000

General Reserve

90,000

 Debtors

1,35,000

 

Capitals:

 

 Less: Provision

15,000

1,20,000

 N

2,25,000

 

Stock

1,50,000

 S

3,75,000

 

Machinery

4,50,000

 G

4,50,000

10,50,000

Patents

90,000

 

 

 

Building

3,00,000

 

 

 

Profit and Loss Account

75,000

 

13,05,000

 

13,05,000

 

 

 

 


G retired on the above date and it was agreed that:
(a) Debtors of 
` 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building will be depreciated by 5%. 
(c) An unrecorded creditor of  ` 30,000 will be taken into account. 
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G's retirement was valued at  ` 90,000.
Pass necessary Journal entries for the above transactions in the books of the firm on G's retirement. (Foreign 2017)

Answer:


Journal

Date

Particulars

L.F.

Debit

 (`)

Credit

 (`)

 

General Reserve A/c

Dr.

 

90,000

 

 

    To N’s Capital A/c

 

 

 

18,000

 

    To S’s Capital A/c

 

 

 

27,000

 

    To G’s Capital A/c

 

 

 

45,000

 

(Balance in reserve distributed among all partners in old ratio)

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

15,000

 

 

 S’s Capital A/c

Dr.

 

22,500

 

 

 G’s Capital A/c

Dr.

 

37,500

 

 

     To Profit & Loss A/c

 

 

 

75,000

 

(Debit balance P&L A/c written off among all partners in old ratio)

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

18,000

 

 

 S’s Capital A/c

Dr.

 

27,000

 

 

     To G’s Capital A/c

 

 

 

45,000

 

(Goodwill adjusted in gaining ratio)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

1,65,000

 

 

   To Patent A/c

 

 

 

90,000

 

   To Stock A/c

 

 

 

7,500

 

   To Machinery  A/c 

 

 

 

22,500

 

   To Building A/c

 

 

 

15,000

 

   To Creditors A/c

 

 

 

30,000

 

(Decrease in assets and increase in liabilities debited to Revaluation A/c)

 

 

 

 

 

 

 

 

 

 

 

Provision for Doubtful Debts A/c

Dr.

 

2,550

 

 

    To Revaluation A/c

 

 

 

2,550

 

(Excess provision written back)

 

 

 

 

 

 

 

 

 

 

 

 N’s Capital A/c

Dr.

 

32,490

 

 

 S’s Capital A/c

Dr.

 

48,735

 

 

 G’s Capital A/c

Dr.

 

81,225

 

 

     To Revaluation A/c

 

 

 

1,62,450

 

(Loss on revaluation debited to partners’ capital accounts in old ratio)

 

 

 

 

 

 

 

 

 

 

 

G’s Capital A/c

Dr.

 

4,21,275

 

 

   To G’s Loan A/c

 

 

 

4,21,275

 

(Amount due to G transferred to his loan A/c)

 

 

 

 


Working Notes:

WN1: Calculation of G’s Share of Goodwill

G's share=Firm's Goodwill×G's Profit Share

G's share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)

WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
N's gain=2/5−2/10=2/10

S's gain=3/5−3/10=3/10Gaining Ratio=2:3

N's share=45,000×2/5=18,000

S's share=45,000×3/5=27,000

WN2: Calculation of Excess/Deficit Provision for Doubtful Debts

Required Provision @5%=1,35,000−6,000×5100=6,450

Existing Provision after writing bad-debts= 9,000

Excess Provision to be written back=2,550 9,000−6,450

WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits

= 4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
=
` 4,21,275

 

 

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 5 – Retirement 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 To 40
Question No. 41 To 45
Question No. 46 To 50
Question No. 51 To 55

Question No. 56 To 60