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12th | Retirement of a Partner | Question No.  36 To 40 | Ts Grewal Solution 2022-2023

Question 36:


Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2022, Naresh retired on that date, Balance Sheet of the firm was as follows:
Liabilities  ( `) Assets  ( `)
General Reserve 12,000 Bank 7,600
Sundry Creditors 15,000 Debtors 6,000
Bills Payable 12,000 Less: Provision for Doubtful Debts 400 5,600
Outstanding Salary 2,200 Stock 9,000
Provision for Legal Damages 6,000 Furniture 41,000
Capital A/cs: Premises 80,000
Pankaj 46,000
Naresh 30,000
Saurabh 20,000 96,000
1,43,200 1,43,200
Additional Information: (a) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for  ` 1,200 and furniture to be brought up to  ` 45,000. (b) Goodwill of the firm be valued at  ` 42,000. (c)  ` 26,000 from Naresh’s Capital Account be transferred to his Loan Account and balance be paid through bank: if required, necessary loan may be obtained from bank. (d) New profit-sharing ratio of Pankaj and Saurabh is decided to be 5 : 1. Give the necessary Ledger Accounts and Balance Sheet of the firm after Naresh’s retirement. (NCERT Modified)

Answer:


Revaluation Account
Dr. Cr.
Particulars  ( `) Particulars  ( `)
Stock 900 Premises 16,000
Provision for Legal Damages 1,200 Provision for Doubtful Debts 100
Revaluation Profit Furniture 4,000
Pankaj’s Capital A/c 9,000
Naresh’s Capital A/c 6,000
Saurabh’s Capital A/c 3,000 18,000
20,100 20,100
Partners’ Capital Accounts
Dr. Cr.
Particulars Pankaj Naresh Saurabh Particulars Pankaj Naresh Saurabh
Naresh’s Capital A/c 14,000 Balance b/d 46,000 30,000 20,000
Naresh’s Loan A/c 26,000 General Reserve 6,000 4,000 2,000
Bank 28,000 Revaluation (Profit) 9,000 6,000 3,000
Balance c/d 47,000  – 25,000 Pankaj’s Capital A/c 14,000
61,000 54,000 25,000 61,000 54,000 25,000
Bank Account
  Dr. Cr.
Particulars  ( `) Particulars  ( `)
Balance b/d 7,600 Naresh’s Capital A/c 28,000
Bank Loan (Balancing Figure) 20,400
28,000 28,000
Balance Sheet as on March 31, 2022
Liabilities  ( `) Assets  ( `)
Sundry Creditors 15,000 Debtors 6,000
Bills Payable 12,000  Less: Provision for Doubtful Debts 300 5,700
Bank Loan 20,400 Stock 8,100
Outstanding Salaries 2,200 Furniture 45,000
Provision for Legal Damages 7,200 Premises 96,000
Naresh’s Loan 26,000
Capitals:
Pankaj 47,000
Saurabh 25,000 72,000
1,54,800 1,54,800
 

Question 37:


A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 3. Their Balance Sheet as at 31st March, 2022 is:
Liabilities  ( `) Assets  ( `)
Creditors 7,000 Land and Building 36,000
Bills Payable 3,000 Plant and Machinery 28,000
Reserves 20,000 Computer Printer 8,000
Capital A/cs: Stock 20,000
A 32,000 Sundry Debtors 14,000
B 24,000 Less: Provision for Doubtful Debts 2,000 12,000
C 20,000 76,000 Bank 2,000
1,06,000 1,06,000
On 1st April, 2022, B retired from the firm on the following terms: (a) Goodwill of the firm is to be valued at  ` 14,000. (b) Stock, Land and Building are to be appreciated by 10%. (c) Plant and Machinery and Computer Printer are to be reduced by 10%. (d) Sundry Debtors are considered to be good. (e) There is a liability of  ` 2,000 for the payment of outstanding salary to the employees of the firm. This liability was not provided in the Balance Sheet but the same is to be recorded now. (f) Amount payable to B is to be transferred to his Loan Account. Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of A and C after B’s retirement.

Answer:


Revaluation Account
Dr. Cr.
Particulars  ( `) Particulars  ( `)
Plant and Machinery (28,000 × 10%) 2,800 Stock (20,000 × 10%) 2,000
Electronic Typewriter (8,000 × 10%) 800 Land and Building (36,000 × 10%) 3,600
Outstanding Salary 2,000 Provision for Doubtful Debts 2,000
Profit transferred to:
A’s Capital A/c 800
B’s Capital A/c 600
C’s Capital A/c 600 2,000
7,600 7,600
Partners’ Capital Accounts
Dr. Cr.
Particulars A B C Particulars A B C
B’s Capital A/c 2,400 1,800 Balance b/d 32,000 24,000 20,000
B’s Loan A/c 34,800 Reserves 8,000 6,000 6,000
Balance c/d 38,400 24,800 Revaluation A/c 800 600 600
A’s Capital A/c 2,400
C’s Capital A/c 1,800
40,800 34,800 26,600 40,800 34,800 26,600
Balance Sheet
an on April 01, 2022 (after B’s Retirement)
Liabilities  ( `) Assets  ( `)
Creditors 7,000 Land and Building (36,000 + 3,600) 39,600
Bills Payable 3,000 Plant and Machinery (28,000 – 2,800) 25,200
B’s Loan 34,800 Electronic Typewriter 8000 – 800) 7,200
Capital A/c: Stock (20,000 + 2,000) 22,000
A 38,400 Sundry Debtors 14,000
C 24,800 Bank 2000
Outstanding Salary 2,000
1,10,000 1,10,000
  Working Note: Adjustment of Goodwill Old Ratio (A, B and C) = 4 : 3 : 3 B retires from the firm. ∴ Gaining Ratio = 4 : 3 Goodwill of the firm = ` 14,000 B’s Share of Goodwill = 14,000×3/10=42,000 This share of goodwill is to be distributed between A and C in their gaining ratio (i.e. 4 : 3). A‘s share= 4,200×4/7=2,400 C‘s share= 4,200×3/7=1,800

Question 38:


X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Balance Sheet of the firm as at 31st March, 2022 was as follows:
Liabilities  ( `) Assets  ( `)
Creditors 21,000 Cash at Bank 5,750
Workmen Compensation Reserve 12,000 Debtors 40,000
Investments Fluctuation Reserve 6,000 Less: Provision for Doubtful Debts 2,000 38,000
Capital A/cs: Stock 30,000
X 68,000 Investment (Market Value  ` 17,600) 15,000
Y 32,000 Patents 10,000
Z 21,000 1,21,000 Machinery 50,000
Goodwill 6,000
Advertisement Expenditure 5,250
1,60,000 1,60,000
Z retired on 1st April, 2022 on the following terms: (a) Goodwill of the firm is to be valued at  ` 34,800. (b) Value of Patents is to be reduced by 20% and that of machinery to 90%. (c) Provision for doubtful debts is to be created @ 6% on debtors. (d) Z took over the investment at market value. (e) Liability for Workmen Compensation to the extent of  ` 750 is to be created. (f) A liability of  ` 4,000 included in creditors is not to be paid. (g) Amount due to Z to be paid as follows:  ` 5,067 immediately, 50% of the balance within one year and the balance by a draft for 3 Months. Give necessary Journal entries for the treatment of goodwill, prepare Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.

Answer:


Journal
Date Particulars L.F. Debit  ( `) Credit  ( `)
2022
April 01 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 Goodwill A/c 6,000
(Existing goodwill written off)
April 01 X’s Capital A/c Dr. 3,480
Y’s Capital A/c Dr. 2,320
            To Z’s Capital A/c 5,800
(Z’s share of goodwill credited to him and gaining partners debited in gaining ratio)
Revaluation Account
Dr. Cr.
Particulars Amount ( `) Particulars Amount ( `)
Patents 2,000 Investments (17,600 – 15,000) 2,600
Machinery 5,000 Creditors 4,000
Prov. for Doubtful Debts 400 Loss on Revaluation transferred
X’s Capital A/c 400
Y’s Capital A/c 267
Z’s Capital A/c 133 800
7,400 7,400
Partners’ Capital Accounts
Dr. Cr.
Particulars X Y Z Particulars X Y Z
Goodwill A/c 3,000 2,000 1,000 Balance b/d 68,000 32,000 21,000
Revaluation A/c 400 267 133 X’s Capital A/c 3,480
Z’s Capital A/c 3,480 2,320 Y’s Capital A/c 2,320
Advertisement Expenditure A/c 2,625 1,750 875 Workmen Compensation Reserve A/c* 5,625 3,750 1,875
Investments A/c 17,600 Investment Fluctuation Reserve A/c* 3,000 2,000 1,000
Bank A/c 5,067
Z’s Loan A/c 2,500
Bills Payable A/c 2,500
Balance c/d 67,120 31,413
76,625 37,750 29,625 76,625 37,750 29,625
Balance Sheet as on April 01, 2022 after Z’s retirement
Liabilities Amount ( `) Assets Amount ( `)
Creditors 17,000 Cash at Bank (5,750 – 5,067) 683
Workmen Compensation Claim 750 Stock 30,000
Bills Payable 2,500 Patents 8,000
Capital A/c’s: Debtors A/c 40,000
X 67,120 Less: Prov. for D/D 2,400 37,600
Y 31,413 98,533 Machinery 45,000
Z’s Loan 2,500
1,21,283 1,21,283
Working Note: Amount due to Z = (21,000+3,480+2,320+1,875+1,000) – (1,000+133+875+17,600) =10,067 Amout paid on Retirement immediately: ` 5,067 Amount paid within one year: 50% of 5,000 = ` 2,500 Amount payable by Bills of Exchange: ` 2,500 (balance 50%)

Question 39:


Ashok, Bhaskar and Chaman were in partnership sharing profits and losses equally. ‘Chaman’ retires from the firm. After adjustments, his Capital Account shows a credit balance of  ` 3,00,000 as on 1st April, 2019. Balance due to ‘Chaman‘ is to be paid in three equal annual instalments along with interest @ 10% p.a. Prepare Chaman‘s Loan Account until he is paid the amount due to him. The firm closes its books on 31st March every year.

Answer:


Dr. Chaman’s Loan A/c Cr.
Date Particulars  ( `) Date Particulars  ( `)
2020 2019
March 31 To Bank A/c (1,00,000 + 30,000) 1,30,000 April 01 By Chaman’s Capital A/c 3,00,000
March 31 To balance c/d 2,00,000 2020
March 31 By Interest on Loan A/c 30,000
(3,00,000 × 10/100)
3,30,000 3,30,000
2021 2020
March 31 To Bank A/c (1,00,000 + 20,000) 1,20,000 April 01 By balance b/d 2,00,000
March 31 To balance c/d 1,00,000 2021
March 31 By Interest on Loan A/c 20,000
(2,00,000 × 10/100)
2,20,000 2,20,000
2022 2021
March 31 To Bank A/c (1,00,000 + 10,000) 1,10,000 April 01 By balance b/d 1,00,000
2022
March 31 By Interest on Loan A/c 10,000
(1,00,000 × 10/100)
1,10,000 1,10,000
Working Notes:   Amount payable per Installment =  ` (3,00,000/3) =  ` 1,00,000

Question 40:


Rakesh retired from the firm. The amount due to him was determined at  ` 90,000. It was decided to pay the due amount as follows: On the date of retirement −  ` 30,000 Balance in three yearly instalments − First two instalments being of  ` 26,000, including interest; and Balance amount as last instalment. Interest was payable @ 10 p.a. Prepare retiring Partners’ Loan Account.

Answer:


Dr. Rakesh’s Loan A/c Cr.
Date Particulars  ( `) Date Particulars  ( `)
Year I To Bank A/c (20,000 + 6,000) 26,000 Year I By Y’s Capital A/c 60,000
To balance c/d 40,000
By Interest on Loan A/c 6,000
(60,000 × 10/100)
66,000 66,000
Year II To Bank A/c (22,000 + 4,000) 26,000 Year II By balance b/d 40,000
To balance c/d 18,000
By Interest on Loan A/c 4,000
(40,000 × 10/100)
44,000 44,000
Year III To Bank A/c (18,000 + 1,800) 19,800 Year III By balance b/d 18,000
By Interest on Loan A/c 1,800
(18,000 × 10/100)
19,800 19,800

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