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Application of Formula of CI

X and Y sha...

Question

$X$ and $Y$ share profits in the ratio of $5 : 3$ . Their Balance Sheet as at $31^{s t}$ March,2018 was:
Liabilities (Rs.) Assets (Rs.)
Creditors
Employees Provident Fund
Workmen Compensation Reserve
Capital A/cs:
X 70,000
Y 31,000
15,000
10,000
5,800
1,01,000 Cash at Bank
Sundry Debtors 20,000
Less: Provision for Doubtful Debts
600
Stock
Fixed Assets
Profit and Loss A/c 5,000
19,400
25,000
80,000
2,400
1,31,800 1,31,800
They admit $Z$ into partnership with $1 / 8^{t h}$ share in profits on this date. $Z$ brings $R s . 20, 000$ as his capital. $R s . 12, 000$ for goodwill in cash. $Z$ acquires share entirely from $X$ . Following revaluation are also made.
(a) Employees Provident Fund liability is to be increased by $R s . 5, 000$ .
(b) All Debtors are good. Therefore, no provision is required on Debtors.
(c) Stock includes $R s . 3, 000$ for obsolete items.
(d) Creditors are to be paid $R s . 1, 000$ more.
(e) Fixed Assets are to be revalued at $R s . 70, 000$ .
Prepare Journal entries, necessary account and new Balance Sheet. Also calculate new profit-sharing ratio.

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Solution

(i) REVALUATION ACCOUNT
Dr. Cr.
Particulars Amount Particulars Amount
To Employee provident fund a/c 5000 By Provision for Doubtful Debts /ac 600
To Fixed Assets a/c 10000 By Loss transferred to:
- X's Capital a/c
- Y's Capital a/c
11500
6900
To Stock a/c 3000
To Creditors a/c 1000
19000 19000

(ii) PARTNER'S CAPITAL A/C
Dr. Cr.
Particulars X Y Z Particulars X Y Z
To Revaluation a/c 11500 6900 By Balance b/d 70000 31000
To Profit and loss a/c 1500 900 By Cash a/c 20000
To Balance c/d 72625 25375 20000 By Workmen Compensation Fund a/c 3625 2175

By Premium for Goodwill a/c 12000
85625 33175 20000 85625 33175 20000

(iii) BALANCE SHEET
Liabilities Amount Assets Amount
Capital a/cs:
- X
- Y
- Z
72625
25375
20000 Cash at Bank(5000+20000+12000) 37000
Creditors 16000 Debtors
20000
Provident Fund
15000 Fixed Assets 70000
Stock (25000-3000) 22000

149000 149000

Working Note:
Calculation of New profit sharing ratio:
Old ratio= 5:3
Z is admitted for 1/8th share
Z acquired entire share from X.
X's new share= 5/8-1/8
= 4/8
New profit sharing ratio= 4:3:1

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Similar questions

X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2019 was:

Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		15,000	Cash at Bank		5,000
Employees' Provident Fund		10,000	Sundry Debtors	20,000
Workmen Compensation Reserve		5,800	Less: Provision for Doubtful Debts	600	19,400
Capital A/cs:			Stock		25,000
X	70,000		Fixed Assets		80,000
Y	31,000	1,01,000	Profit and Loss A/c		2,400

		1,31,800			1,31,800

They admit Z into partnership with 1/8th share in profits on 1st April, 2019. Z brings ₹ 20,000 as his capital and ₹ 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:
(a) Employees' Provident Fund liability is to be increased by ₹ 5,000.
(b) All Debtors are good.
(c) Stock includes ₹ 3,000 for obsolete items.
(d) Creditors are to be paid ₹ 1,000 more.
(e) Fixed Assets are to be revalued at ₹ 70,000.
Prepare Journal entries, necessary accounts and new Balance Sheet. Also, calculate new profit-sharing ratio.

The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3 : 2 as at March 31, 2007 :

$\begin{matrix} Capital and Liabilities & Rs & Assets & Rs Creditors & 50, 000 & Cash at Bank & 40, 000 Employee's Provident Fund & 10, 000 & Sundry Debtors & 1, 00, 000 Profit & Loss A/c & 85, 000 & Stock & 80, 000 Capital A/cs : & Fixed Assets & 60, 000 X & 40, 000 Y & 62, 000 Z & 33, 000 - ------ - & 1, 35, 000 - -------- - 2, 80, 000 - -------- - - -------- - & 2, 80, 000 - -------- - - -------- - \end{matrix}$

X retired on March 31, 2007 and Y and Z decided to share profits in future in the ratio of 3 : 2 respectively.

The other terms on retirement were as follows :

(i) Goodwill of the firm is to be valued at Rs 80,000.

(ii) Fixed Assets are to be depreciated to Rs 57,500.

(iii) Make a provision for doubtful debts at 5% on debtors.

(iv) A liability for claim, included in creditors for Rs 10,000, is settled and paid at Rs 8,000.

Prepare Revaluation Account and Partner's Capital Accounts.

X

and

Y

are partners in firm sharing profits in the ratio of

3 : 2

. They admitted

Z

as a new partner and fixed the new profit-sharing ratio as

3 : 2 : 1

. At time of admission of

Z

, Debtors and Provision for Doubtful Debts appeared at

R s . 50, 000

and

R s . 5, 000

respectively All debtors are good. Pass the necessary Journal entries.

Q. Following is the Balance Sheet of

X

and

Y

as at

31^{s t}

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^{s t}

April,2018 on the following terms:
(a) Provision for doubtful debts is to be maintained at

5 %

on Debtors.
(b) Outstanding rent amounted to

R s . 15, 000

.
(c) An accrued income of

R s . 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

R s . 18, 000

.
(e) New Profit-Sharing Ratio of partners will be

4 : 3 : 2

.
(f)

Z

will bring in

R s . 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

R s . 90, 000; R s . 78, 000

and

R s . 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.

Q. Shyamlal and Sanjay were in partnership business sharing profits and losses in the ratio of

2 : 3

respectively. Their Balance Sheet as at

31^{s t}

March, 2018 was:

Liabilities	(Rs.)	Assets	(Rs.)
Sundry Creditors Capital A/cs: Shyamlal 34,050 Sanjay 34,050	12,435 68,100	Cash in Hand Cash at Bank Sundry Debtors Stock Furniture Building	710 11,925 5,500 18,000 4,400 40,000
	80,535		80,535

1^{s t}

April,2018, they admitted Shankar into partnership for

1 / 3^{r d}

share in the future profits on the following terms:
(a) Shankar is to bring in

R s . 30, 000

as his capital and

R s . 20, 000

as goodwill which is to remain in the business.
(b) Stock and Furniture are to be reduced in value by

10 %

.
(c) Building is to be appreciated by

R s . 15, 000

.
(d) Provision of

5 %

is to be made on Sundry Debtors for Doubtful Debts.
(e) Unaccounted Accrued income of

R s . 2, 400

to be provided for. A debtor, whose dues of

R s . 4, 800

were written off as bad debts, paid

50 %

in full settlements.
(f) Outstanding Rent amounted to

R s . 4, 800

.
Show Profit and Loss Adjustment Account (Revaluation Account), Capital Accounts of Partners and opening Balance Sheet of the new firm.

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Particulars	Amount	Particulars	Amount
To Employee provident fund a/c	5000	By Provision for Doubtful Debts /ac	600
To Fixed Assets a/c	10000	By Loss transferred to: - X's Capital a/c - Y's Capital a/c	11500 6900
To Stock a/c	3000
To Creditors a/c	1000
	19000		19000

Particulars	X	Y	Z	Particulars	X	Y	Z
To Revaluation a/c	11500	6900		By Balance b/d	70000	31000
To Profit and loss a/c	1500	900		By Cash a/c			20000
To Balance c/d	72625	25375	20000	By Workmen Compensation Fund a/c	3625	2175
				By Premium for Goodwill a/c	12000
	85625	33175	20000		85625	33175	20000