Goodwill Valuation (Retirement)

Q. A firm earns profit of ₹ 5, 00, 000. Normal Rate of Return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outsiders liabilities as on the date of goodwill are ₹ 55, 00, 000 and ₹ 14, 00, 000 respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation of Average Profit Method.

Q.

A and B are partners in a firm sharing profits and losses in the ratio of 3: 2. They decide to admit C into partnership with $\frac{1}{4}$ share in profits. C will bring in Rs.30, 000 for capital and the requisite amount of goodwill premium in cash. The goodwill of the firm is valued at Rs. 20, 000. The new profit sharing ratio is 2 : 1: 1. A and B withdraw their share of goodwill. Given necessary journal entries.

Q.

Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with $\frac{1}{5}$ share in the profits of the firm. Ajay brings Rs 5, 00, 000 as his share of capital. The value of the total assets of the firm was Rs 15, 00, 000 and outside liabilities were valued at Rs 5, 00, 000 on that date. Give the necessary Journal entry to record good will at the time of Ajay's admission. Also show your workings.

Q.

A company offered 1, 00, 000 shares of Rs 10 each payable as Rs 3 on application, Rs 2.50 on allotment, Rs 2.50 on 1st call and Rs 2 on the final call.

The public applied for 1, 52, 000 shares. The shares were allotted on a pro-rata basis to the applicants of 1, 50, 000 shares. All shareholders paid the allotment money excepting one shareholder who was allotted 200 shares. These shares were forfeited. The first call was made thereafter. The forfeited shares were re-issued @ Rs 9 per share Rs 8 paid up. The final call was not yet made.

You are required to pass journal entries.

Q.

A, B and C are partners sharing profits in the ratio of 1 : 2 : 3. C retires and his capital, after making adjustments for reserves and profit on revaluation stands at Rs 1, 20, 000. A and B agreed to pay him Rs 1, 50, 000 in full settlement of his claim. Record necessary journal entry for the treatment of goodwill if the new profit sharing ratio is decided at 1 : 3.

Q.

The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2:2:1, as they are partners from the beginning now Ali wants that he should get equal share in the profits with Harry and Porter and he further wishes that the change in the profit sharing ratio should come into effect retrospectively were for the last three year. Harry and Porter have agreement on this acount.

The profits for the last three years were

(Rs)

2003-04 22, 000

2004-05 24, 000

2005-06 29, 000

Show adjustment of profits by means of a single adjustment journal entry.

Q.

A Company issued 50, 000 equity shares of Rs 10 each at par payable as under:

On Application Rs 2; on allotment Rs 1; on first call Rs 3 and on final call Rs 4 per share (four months after first call).

Amount due on application and allotment was duly received. One shareholder holding 1, 000 shares could not pay the first call money in time. Another shareholder holding 2, 000 shares paid the final call money along with the first call money.

Final call was made. All the shareholders paid in full. First call arrear on 1, 000 shares were also received at the time of final call.

(a) Make entries in the Company's journal for transactions relating to first call and final call.

(b) Company also decided to provide free transportation facility to its employees. Identify the value involved in this decision.

Q. A limited company offered for subscription of 1, 00, 000 equity shares of Rs.10 each at a premium of Rs. 2 per share. 2, 00, 000 : 10% Preference shares of Rs. 10 each at par. The amount on share was payable as under
$\begin{array}{ccc}& & \\ & \text{Equity Shares}& \text{Preference Shares}\\ \text{On Application}& \text{Rs.3 per share}& \text{Rs.3 per share}\\ \text{On Allotment}& \text{Rs.5 per share}& \text{Rs.4 per share}\\ & \text{(including a premium)}& \\ \text{On First Call}& \text{Rs.4 per share}& \text{Rs.3 per share}\end{array}$

All the shares were fully subscribed, called-up and paid.
Record these transactions in the journal and cash book of the company.

Q.

S Ltd issued 5, 000 shares of Rs 100 each at a premium of Rs 10 each payable as follows:

$\begin{array}{cc}\text{On Application}& \text{Rs 50}\\ \text{On Allotment}& \text{Rs 40 (including premium)}\\ \text{On First and Final Call}& \text{Rs 40}\end{array}$

All the shares were applied for and instalments received on due dates with the exception of the Allotment and First & Final call on 100 shares; these shares were forfeited and re-issued as fully paid at Rs 105 per share.

Pass necessary Journal Entries in the books of the Company.

Q.

Arti and Bharti are partners in a firm sharing profits in 3:2 ratio, They admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings Rs. 50, 000 for his capital and Rs. 10, 000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs. 5, 000. the new profit sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm?

Q.

From the following information, calculate the amount of subscriptions outstanding as on 31st March, 2009 :

A club has 250 members each paying an annual subscription of Rs 1, 000. The Receipts & Payments account for the year showed a sum of Rs 2, 65, 000 received as subscriptions. The following additional information is provided.

$\begin{array}{cc}& \text{Rs}\\ \text{Subscriptions Outstanding on 31st March, 2008}& 40,000\\ \text{Subscriptions Received in advance on 31st March, 2009}& 30,000\\ \text{Subscriptions Received in advance on 31st March, 2008}& 12,000\end{array}$

Q.

X Ltd. invited applications for 20, 000 shares of Rs 10 each payable as follows: Rs 3 on Application; Rs 2 on Allotment, Rs 2.50 on First Call and Rs 2.50 on Second Call.

Public Applied for 30, 000 shares and the allotments were made as under:

To Applications for 8, 000 shares .................... full.

To Applications for 16, 000 shares .................... 12, 000 shares

To Applications for 6, 000 shares .................... Nil.

All moneys were duly received.

(a) Pass Journal Entries.

(b) Which value has been affected by making full allotment to the applicants for 8, 000 shares and rejecting the applicants for 6, 000 shares? Suggest a better alternative.

Q.

Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3:2:1, subject to the following

(i) Sona's share in the profits, guaranteed to be not less than Rs 15, 000 in any year.

(ii) Babita gives guarantee to the effect that gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years, when she was carrying on profession alone (which is Rs 25, 000). The net profit for the year ended March 31, 2007 is Rs 75, 000. The gross fee earned by Babita for the firm was Rs 16, 000.

You are required to show profit and loss appropriation account (after giving effect to the alone).

Q. Rupak Ltd issued 10, 000 shares of Rs. 100 each payable Rs.20 per share on application, Rs. 30 per share on allotment and balance in two calls of Rs. 25 per share. The application and allotment money were duly received. On first call all member paid their dues except one number holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made. Give journal entries and prepare cash book.

Q.

When goodwill is purchased for a cost, how is it shown in the cash flow statement?

Q. Naman Ltd issued 20, 000 shares of Rs. 100 each, payable Rs. 25 on application, Rs. 30 on allotment, Rs. 25 on first call and the balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment and calls money and Kumkum, who holding 100 shares did not pay both the calls. The directors forfeited shares of Anubha and Kumkum.
Give journal entries.

Q.

A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. A retires and after all adjustments relating to revaluation, goodwill and accumulated profits the capital account of B showed a credit balance of Rs 1, 40, 000 and that of C Rs 1, 00, 000. It was decided to adjust the capitals of B and C in their profit sharing ratio. Calculate the new capitals of the partners and record necessary entry for bringing in or withdrawing cash.

Q. Krishna Ltd issued 15, 000 shares of Rs.100 each at a premium of Rs.10 per share, payable as follows
$\begin{array}{ccc}& & \\ & & \text{(Rs.)}\\ \text{On Application}& =& 30\\ \text{On Allotment}& =& 50\text{(including premium)}\\ \text{On First and Final Call}& =& 30\end{array}$

All the shares subscribed and the company received all the money due. With the exception of the allotment and call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid share of Rs.120 each.

Give journal entries in the books of the company.

Q.

(a) Show the following information in financial statements of a 'Not-for-Profit Organisation:

$\begin{array}{cc}\text{Details}& \text{Amount (Rs)}\\ \text{Match Expenses}& 8,00,000\\ \text{Match Fund}& 4,00,000\\ \text{Donation for Match Fund}& 2,40,000\\ \text{Sale of Match tickets}& 3,60,000\end{array}$

(b) What will be the effect, if match expenses go up by Rs 2, 50, 000 other things remaining the same?

Q.

Pass necessary Journal entries for the issue and redemption of Debentures in the followings cases :

(i) 15, 000; $10\%$ Debentures of Rs 100 each issued at $10\%$ premium, repayable at par.

(ii) 6, 00, 000; $12\%$ Debenture of Rs 500 each issued at $5\%$ premium , repayable at $10\%$ pemium.

Q.

Sunrise Ltd. was registered with a capital of Rs 4, 00, 000 in shares of Rs 100 each. It issued 2, 000 of such shares payable Rs 25 per share on application; Rs 25 on allotment; Rs 20 on first call; and the balance as and when required.

All moneys payable on application and allotment were duly received, but when the first call of Rs 20 per share was made, one shareholder holding 100 shares failed to pay the amount due and another shareholder holding 200 shares paid them in full.

Record these transactions in the journal of the Company.

Q.

A and B are partners sharing profits in the ratio of 3:2. They admit C into the firm for $\frac{1}{4}th$ share in profit which he takes $\frac{1}{6}th$ from A and $\frac{1}{12}th$ from B. C brings Rs 50, 000 as goodwill . No goodwill account appears in the books of the firm. Pass necessary journal entries to record this arrangement.

Q.

A, B and C are partners, sharing profits in the ratio of 4 : 3 : 2. D is admitted for $\frac{2}{9}$ share of profits and brings Rs 3.00, 000 as his capital and Rs 1, 00, 000 for his share of goodwill. The new profit sharing ratio will be A : B : C : D. 3 : 2 : 2 : 2.

Journalise the above arrangement in the books.

Q.

A. B and C are partners sharing profits and losses in the ratio of 5:4:1. It was decided that with effect from 1st April 2016 the profit sharing ratio will be 9:6:5. Goodwill is to be valued at 2 year's purchase of average of 3 year's profits. The profits for 2013-14, 2014-15 and 2015-16 were Rs 48, 000, Rs 42, 000 and Rs 60, 000 respectively.

Pass the necessary journal entry for the treatment of goodwill.

Q.

Mohan Lal and Sohan Lal were partners in a firm sharing profits and losses in 3 : 2 ratio. They admitted Ram Lal for $\frac{1}{4}$ share on 1.1.2003. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profits of the last 4 years which were Rs.50, 000 for 2003, Rs. 60, 000 for 2004, Rs. 90, 000 for 2005 and Rs. 70, 000 for 2006. Ram Lal did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram Lal's admission when

(a) Goodwill already appears in the books at Rs. 2, 02, 500.

(b) Goodwill appears in the books at Rs.2, 500.

(c) Goodwill appears in the books at Rs. 2, 05, 000.

Q.

X Ltd invites application for the issue of 10, 000, 14% debentures of Rs.100 each payable as to Rs.20 on application, Rs.60 on allotment and the balance on call. The company receives applications for 13, 500 debentures, out of which application for 8, 000 debentures are allotted in full, 5, 000 only 40% and the remaining rejected. The surplus money on partially allotted applications is utilised towards allotment. All the sums due are duty received.

Q.

Pawan Ltd. was registered with an authorised Capital of Rs 5, 00, 000 divided into shares of Rs 10 each. It purchased a Building from Y for Rs 2, 00, 000 and issued fully paid shares to Y for purchases consideration.It invited applications for the balance 30, 000 shares payable as under:---- Rs 3 per share on Application; Rs 3 per share on Allotment; Rs 2 per share First Call; and Rs 2 on Final Call.

Ashok, who had been allotted 500 shares failed to pay both the Calls. His shares were forfeited and re-issued at Rs 9 per share to Hari, as fully paid up. Make neccessary entries in the Journal of the Company.

Q. Mohit Glass Ltd issued 20, 000 shares of Rs. 100 each at Rs. 110 per share, payable Rs. 30 on application, Rs. 40 on allotment (including premium), Rs. 20 on first call and Rs. 20 on final call. The applications were received for 24, 000 shares and allotted 20, 000 shares and reject 4, 000 shares and amount returned thereon. The money was duly received. Give journal entries.

Q. Life machine tools Limited, issued 50, 000 equity shares of Rs.10 each at Rs.12 per share, payable at Rs.5 on application (including premium), Rs.4 on allotment and the balance on the first and final call.

Applications for 70, 000 shares had been received. Of the cash received, Rs.40, 000 was returned and Rs.60, 000 was applied to the amount due on allotment, the balance of which was paid. All shareholders paid the call due, with the exception of one share holder of 500 shares. These shares were forfeited and reissued as fully paid at Rs.8 per share. Journalise the transactions.

Q.

From the following information, calculate the amount that will be shown against Stationery Account in Income and Expenditure Account for the year ended 31st March, 2018.

$\begin{array}{ccc}\text{Particulars}& 01-04-2017& 31-03-2018\\ \text{Creditors for Stationery}& 5,000& 12,000\\ \text{Stock of Stationery}& 17,000& 32,000\end{array}$

During the year ended 31st March, 2018, payment made to creditors amounted to Rs 60, 000. Stationery purchased during the year was Rs 1, 00, 000 (out of which 30$\%$ is cash purchases).