16. X and Y are partners, sharing profit and losses in the ratio of 3/5 : 2/5. They admit Z a differently abled person into the firm on 1st April, 2017, when their Balance sheet as follows:
Liabilities | Amount | Assets | Amount |
Creditors | 45000 | Cah at Bank | 15000 |
General Reserve | 36000 | Debtors 60000 | |
X Capital A/cs | 180000 | Less: Provision for doubtful Debts 2400 | 57600 |
Y Capital A/cs | 90000 | Patents | 44400 |
X Current A/cs | 30000 | Investments | 24000 |
Y Current A/cs | 6000 | Fixed Assets | 216000 |
Goodwill | 30000 | ||
387000 | 387000 |
(a) Provision for Doubtful Debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to 15,000.
(c) An accrued income of the 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 profit 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(h) Half of the amount of goodwill is to be withdrawn by X and Y.
Give the necessary Journal entries, Partners' Capital and Current Accounts, and the Balance Sheet of the new firm. Identify the value being highlighted by admitting Z as a partner in the firm.
Dear Student,
The solution is worked out below.
Working Notes:
Calculation of Z's Share of Goodwill
Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio - New Ratio
The solution is worked out below.
Journal | |||||
Date | Particulars | L.F. | Debit Amount (Rs) |
Credit Amount (Rs) |
|
(i) | Bank A/c | Dr. | 78,000 | ||
To Z’s Capital A/c | 60,000 | ||||
To Premium for Goodwill A/c | 18,000 | ||||
(Capital and goodwill brought in by Z) | |||||
(ii) | Premium for Goodwill A/c | Dr. | 18,000 | ||
To X’s Current A/c | 12,600 | ||||
To Y’s Current A/c | 5,400 | ||||
(Goodwill distributed in sacrificing ratio) | |||||
(iii) | X’s Current A/c | Dr. | 6,300 | ||
Y’s Current A/c | Dr. | 2,700 | |||
To Bank A/c | 9,000 | ||||
(Half goodwill withdrawn) | |||||
Dr. | Partners’ Capital Accounts | Cr. | |||||||
Particulars | X | Y | Z | Particulars | X | Y | Z | ||
Balance c/d | 1,80,000 | 90,000 | 60,000 | Balance b/d | 1,80,000 | 90,000 | |||
60,000 | |||||||||
1,80,000 | 90,000 | 60,000 | 1,80,000 | 90,000 | 60,000 | ||||
Dr. | Partners’ Current Accounts | Cr. | |||||
Particulars | X | Y | Particulars | X | Y | ||
Revaluation A/c | 10,260 | 6,840 | Balance b/d | 30,000 | 6,000 | ||
Goodwill A/c | 18,000 | 12,000 | General Reserve | 12,600 | 5,400 | ||
Revaluation A/c | 18,000 | Premium for Goodwill A/c | 21,600 | 14,400 | |||
Bank A/c | 6,300 | 2,700 | |||||
Balance c/d | 11,640 | 4,260 | |||||
13,560 | 5,750 | 13,560 | 5,750 | ||||
Bank Account | |||||
Dr. | Cr. | ||||
Particulars | Amount Rs |
Particulars | Amount Rs |
||
Balance b/d | 15,000 | X’s Current A/c | 6,300 | ||
Premium for Goodwill | 18,000 | Y’s Current A/c | 2,700 | ||
Z’s Capital A/c | 60,000 | Balance c/d | 84,000 | ||
93,000 | 93,000 | ||||
Balance Sheet | |||||
Liabilities | Amount Rs |
Assets | Amount Rs |
||
Outstanding Rent | 15,000 | Cash at Bank | 84,000 | ||
X’s Current A/c | 11,640 | Patents | 44,400 | ||
Y’s Current A/c | 4,260 | Fixed Assets | 2,16,000 | ||
Capital A/c | Accrued Income | 4,500 | |||
X | 1,80,000 | Debtors | 60,000 | ||
Y | 90,000 | Less: Provision | 3,000 | 57,000 | |
Z | 60,000 | 3,30,000 | |||
Creditors | 45,000 | ||||
4,05,900 | 4,05,900 | ||||
Working Notes:
Revaluation Account | ||||||
Dr. | Cr. | |||||
Particulars | Amount Rs |
Particulars | Amount Rs |
|||
To Provision for Doubtful Debts | 600 | Accrued Income | 4,500 | |||
To Outstanding Rent | 15,000 | Loss on Revaluation | ||||
To Investments | 6,000 | X’s Current A/c | 10,260 | |||
Y’s Current A/c | 6,840 | 17,100 | ||||
21,600 | 21,600 | |||||
Calculation of Z's Share of Goodwill
Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio - New Ratio