Question

Following is the Balance Sheet of $X$ and $Y$ as at ${31}^{st}$March,2018 who are partners in a firm sharing profits and losses in the ratio of $3:2$ respectively:

Liabilities	(Rs.)	Assets	(Rs.)
Creditors General Reserve Capital A/cs: X 1,80,000 Y 90,000 Current A/cs: X 30,000 Y 6,000	45,000 36,000 2,70,000 36,000	Cash at Bank Debtors 60,000 Less: Provision for Doubtful Debts 2,400 Patents Investments Fixed Assets Goodwill	15,000 57,600 44,400 24,000 2,16,000 30,000
	3,87,000		3,87,000

$Z$ is admitted as a new partner on $1^{st}$April,2018 on the following terms:
(a) Provision for doubtful debts is to be maintained at $5\%$ on Debtors.
(b) Outstanding rent amounted to $Rs.15,000$.
(c) An accrued income of $Rs.4,500$ does not appear in the books of the firm. It is now to be recorded.
(d) $X$ takes over the Investments at an agreed value of $Rs.18,000$.
(e) New Profit-Sharing Ratio of partners will be $4:3:2$.
(f) $Z$ will bring in $Rs.60,000$ as his capital by cheque.
(g) $Z$ is to pay an amount equal to his share in firm's goodwill valued at twice the average profits of the last three years which were $Rs.90,000;Rs.78,000$ and $Rs.75,000$ respectively.
(h) Half of the amount of goodwill is to be withdrawn by $X$ and $Y$.
You are required to pass Journal entries, prepare Revaluation Account, Partners Capital and Current Accounts and the Balance Sheet of the new firm.

Answer 1

(i) JOURNAL

1. Bank a/c........ Dr. 96000

To Z's Capital a/c 60000

To Premium for Goodwill a/c 36000

(Being capital and premium for goodwill brought in by Z)

2. Premium for Goodwill a/c.... Dr. 36000

To X's Current a/c 25200

To Y's Current a/c 10800

(Being premium for goodwill distributed among the partners in the ratio of 7:3)

3. X's Current a/c...... Dr. 12600

Y's Current a/c...... Dr. 5400

To Bank a/c 18000

(Being half of the premium for goodwill withdrawn by the partners)

(ii) REVALUATION ACCOUNT
Dr. Cr.

Particulars	Amount	Particulars	Amount
To Provision for Doubtful debts a/c	600	By Accrued Income a/c	4500
To Outstanding Rent a/c	15000	By Loss on revaluation - X's Capital a/c - Y's Capital a/c	10260 6840
To Investment a/c	6000
	21600		21600

(iii) PARTNER'S CAPITAL A/C
Dr. Cr.

Particulars	X	Y	Z	Particulars	X	Y	Z
				By Balance b/d	180000	90000
To Balance c/d	180000	90000	60000	By Bank a/c			60000
	180000	90000	60000		180000	90000	60000

(iv) PARTNER'S CURRENT A/C
Dr. Cr.

Particulars	X	Y	Z	Particulars	X	Y	Z
To Revaluation a/c	10260	6840		By Balance b/d	30000	6000
To Goodwill a/c	18000	12000		By General Reserve a/c	21600	14400
To Bank a/c	12600	5400		By Premium for Goodwill a/c	25200	10800
To Investment a/c	18000
To Balance b/d	17940	6960
	76800	31200			76800	31200

(v) BALANCE SHEET

Liabilities	Amount	Assets	Amount
Capital a/cs: - X - Y - Z	180000 90000 60000	Patents	44000
Outstanding Rent	15000	Fixed Assets	216000
Current a/cs: - X - Y	17940 6960	Accrued Income	4500
Creditors	45000	Cash at Bank (15000+96000-18000)	93000
		Debtors (60000-3000)	57000
	414900		414900

Working Note:

1. Calculation of amount of Goodwill:

Average Profit= [90000+78000+75000]/3

= 81000

Goodwill= 81000 * 2

= 162000

Z's share of goodwill= 162000* 2/9

= 36000

2. Sacrificing ratio:

X's sacrifice= 3/5-4/9= 7/45

Y's sacrifice= 2/5-3/9= 3/45

Sacrificing ratio= 7:3