Interest Coverage Ratio

Anju, Manju and Mamta are partners whose fixed capitals were Rs 10, 000, Rs 8, 000 and Rs 6, 000, respectively. As per the partnership agreement, there is a provision for allowing interest on capitals @ 5% p.a. but entries for the same have not been made for the last three years. The profit sharing ratio during there years remained as follows:

Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan. 2017.

Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of Rs 1, 50, 000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:

(i) Partners capital on April 1, 2016;

Simmi, Rs 30, 000; Sonu, Rs 60, 000;

(ii) Current accounts balances on April 1, 2016;

Simmi, Rs 30, 000 (cr.); Sonu, Rs 15, 000 (cr.);

(iii) Partners drawings during the year amounted to

Simmi, Rs 20, 000; Sonu, Rs 15, 000;

(iv) Interest on capital was allowed @ 5% p.a.;

(v) Interest on drawing was to be charged @ 6% p.a. at an average of six months;

(vi) Partners’ salaries : Simmi Rs 12, 000 and Sonu Rs 9, 000. Also show the partners’ current accounts.

The following balances appeared in the books of Z.Ltd. on April 01, 2016

The annual instalment added to the fund is Rs 20, 575. On March 31, 2017, the bank balance after the receipt of interest on the investment was Rs 39, 100. On that date, all the investments were sold at 83 per cent and the debentures were duly redeemed.

Show the necessary ledger accounts for the year 2016-17.

Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2017:

During the year Mahadev’s drawings were Rs 30, 000. Profits during 2017 is Rs 10, 00, 000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.

Arti, Bharti and Seema are partners sharing profits in the proportion of 3:2:1 and their Balance Sheet as on March 31, 2016 stood as follows:

Bharti died on June 12, 2016 and according to the deed of the said partnership, her executors are entitled to be paid as under:

(a) The capital to her credit at the time of her death and interest thereon @ 10% per annum.

(b) Her proportionate share of reserve fund.

(c) Her share of profits for the intervening period will be based on the sales during that period, which were calculated as Rs 1, 00, 000. The rate of profit during past three years had been 10% on sales.

(d) Goodwill according to her share of profit to be calculated by taking twice the amount of the average profit of the last three years less 20%. The profits of the previous years were:

2013 – Rs 8, 200

2014 – Rs 9, 000

2015 – Rs 9, 800

The investments were sold for Rs 16, 200 and her executors were paid out. Pass the necessary journal entries and write the account of the executors of Bharti.

On April 01, 2016 the following balances appeared in the books of Z. Ltd.:

The investments consisted of 4% Government securities of the face value of Rs 90, 000.

The annual instalment was Rs 16, 400. On March 31, 2017, the balance at Bank was Rs 26, 000 (after receipt of interest on D.R.Reserve Fund Investment). Investments were realised at 92% and the Debentures were redeemed. The interest for the year had already been paid.

Show the ledger accounts affecting redemption.

Dinker and Ravinder were partners sharing profits and losses in the ratio of 2:1. The following balances were extracted from the books of account, for the year ended December 31, 2017.

Prepare final accounts for the year ended December 31, 2017, with following adjustment:

(a) Stock on December 31, 2017, was Rs 42, 500.

(b) A Provision is to be made for bad debts at 5% on debtors

(c) Rent outstanding was Rs 1, 600.

(d) Wages outstanding were Rs 1, 200.

(e) Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be charged @ 6% per annum.

(f) Dinker and Ravinder are entitled to a Salary of Rs 2, 000 per annum

(g) Ravinder is entitled to a commission Rs 1, 500.

(h) Depreciation is to be charged on Building @ 4%, Plant and Machinery, 6%, and furniture and fixture, 5%.

(i) Outstanding interest on loan amounted to Rs 350.

Following is the Balance Sheet of Prateek, Rockey and Kushal as on March 31, 2017.

Rockey died on June 30, 2017. Under the terms of the partnership deed, the executors of a deceased partner were entitled to:

a) Amount standing to the credit of the Partner’s Capital account.

b) Interest on capital at 5% per annum.

c) Share of goodwill on the basis of twice the average of the past three years’ profit and

d) Share of profit from the closing date of the last financial year to the date of death on the basis of last year’s profit.

Profits for the year ending on March 31, 2015, March 31, 2016 and March 31, 2017 were Rs 12, 000, Rs 16, 000 and Rs 14, 000 respectively. Profits were shared in the ratio of capitals.

Pass the necessary journal entries and draw up Rockey’s capital account to be rendered to his executor.