Death of a partner (Question Bank)
Death of a partner
You are given the Balance Sheet of Mohit, Sohan and Rahul who are partners sharing profits in the ratio of 2 : 2 : 1 as at March 31, 2017.
|
Liabilities |
|
₹ |
Assets |
₹ |
|
Creditors |
|
40,000 |
Goodwill |
30,000 |
|
General Reserve |
|
25,000 |
Fixed Assets |
60,000 |
|
Capitals: |
|
|
Stock |
10,000 |
|
Mohit |
30,000 |
|
Sundry Debtors |
20,000 |
|
Sohan |
25,000 |
|
Cash at Bank |
15,000 |
|
Rahul |
15,000 |
70,000 |
|
|
|
|
|
1,35,000 |
|
1,35,000 |
Sohan died on June 15,
2017. According to the Deed, his legal representatives are entitled to:
- Balance in Capital Account;
- Share of goodwill valued on the
basis of thrice the average of the past 4 year’s profits;
- Share in profits up to the date
of death on the basis of average profits for the past 4 years;
- Interest on capital account @
12% p.a.
- New Profit sharing ratio of the
firm will be 3:2 among Mohit and Rahul respectively.
Profits for the years
ending on March 31 of 2014, 2015, 2016, 2017 respectively were ₹ 15,000, ₹
17,000, ₹ 19,000 and ₹ 13,000.
Sohan's legal representatives were to be paid the amount due. Mohit and Rahul
continued as partners by taking over Sohan’s share equally. Work out the amount
payable to Sohan's legal representatives.
[[NCERT Textbook]]
Partnership Deed of C
and D, who are equal partners, has a clause that any partner may retire from
the firm on the following terms by giving a six-month notice in writing:
The retiring partner shall be paid:-
- the amount standing to the
credit of his Capital Account and Current Account.
- his share of profit to the date
of retirement, calculated on the basis of the average profit of the three
preceding completed years.
- half the amount of the goodwill
of the firm calculated at 1½ times the average profit of the three
preceding completed years.
C gave notice on 31st
March, 2017 to retire on 30th September, 2017, when the balance of his Capital
Account was ₹ 6,000 and his Current Account (Dr.) ₹ 500. Profits for
the three preceding completed years ended 31 st March, were:
2015- ₹ 2,800; 2016- ₹ 2,200 and 2017- ₹1,600. What
amount is due to C as per the partnership agreement?
X, Y and Z were
partners in a firm sharing profits in the ratio of 4 : 3 :1. The firm closes
its books on 31st March every year. On 1st February, 2019, Y died and it
was decided that the new profit-sharing ratio between X and Z will be equal.
Partnership Deed provided for the following on the death of a partner:
- His share of goodwill be
calculated on the basis of half of the profits credited to his account
during the previous four completed years. The firm's profits for the last
four years were:
|
Year |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
|
Profit (₹) |
1,50,000 |
1,00,000 |
50,000 |
1,00,000 |
- His share of profit in the year
of his death was to be computed on the basis of average profit of past two
years.
Pass necessary Journal
entries relating to goodwill and profit to be transferred to Y's Capital
Account.
Sharma, Verma and
Goyal are partners in a firm. On 1st April, 2012 the balances in their Capital
Accounts were as follows:
Sharma ₹ 4,00,000; Verma ₹ 4,20,000 and Goyal ₹ 3,70,000. Firm
closes its accounts every year on 31st March. Verma died on 30th September,
2012. In the event of death of any partner following are the provisions in the
Partnership Deed:
- Interest on Capital will be
calculated at the rate of 10% p.a.
- The deceased partner's legal
representative will be paid ₹ 35,000 for his share of goodwill.
- Firm had a Reserve Fund of
₹ 2,10,000. The deceased partner will be paid his share in the
Reserve Fund.
- His share of profit till the
date of death will be calculated on the basis of sales. It is also
specified that the sales during the year 2011-12 were ₹ 15,00,000.
The sales from 1st April, 2012 to 30th September, 2012 were
₹ 3,00,000. The profit of the firm for the year ending 31st March,
2012 was ₹ 3,00,000
Prepare Verma's
Capital Account to be presented to his representative.
[2013]
The Balance Sheet of
Sadhu, Raja and Karan who were sharing profits in the ratio of 4 : 2 : 4 as on
31st March, 2012 was as follows:
|
Liabilities |
|
₹ |
Assets |
₹ |
|
General Reserve |
|
10,000 |
Cash |
26,000 |
|
Bill Payable |
|
20,000 |
Stock |
64,000 |
|
Loan |
|
22,000 |
Investment |
85,000 |
|
Capital A/cs: |
|
|
Land and Building |
97,000 |
|
Sadhu |
80,000 |
|
Sadhu's loan |
20,000 |
|
Raja |
60,000 |
|
|
|
|
Karan |
1,00,000 |
2,40,000 |
|
|
|
|
|
2,92,000 |
|
2,92,000 |
Sadhu died on 31st
July 2012. The Partnership Deed provided for the following on the death
of a partner:
- Goodwill of the firm be
valued at two years' purchase of average profits for the last three years.
- Sadhu's share of profit or loss
till the date of his death was to be calculated on the basis of sales.
Sales for the year ended 31st March, 2012 amounted to ₹ 4,50,000 and
that from 1st April to 31st July 2012 to ₹ 2,70,000. The profit for the
year ended 31st March 2012 was calculated as ₹ 1,25,000.
- Interest on capital was to be
provided @ 5% p.a.
- The average profits of the last
three years were ₹ 55,000.
Prepare Sadhu's
Capital Account to be rendered to his executor.
[2013]
X, Y and Z are in
partnership sharing profits in the proportion of 3 : 2 : 1. There is no
goodwill A/c in the books of the firm.
As from 1st April, 2018, it was agreed that X should give only part of time, to
the business and that in consequence, he should receive in future only one half
of his previous share, the remaining half being divided equally between Y and Z
The goodwill to be valued for this purpose, at ₹ 40,000.
Show the new share of partners and pass necessary journal entry.
A, B and C are in
partnership, sharing profits in the proportion of two-thirds, one-sixth, and
one-sixth respectively.
A died on the 30th June, 2018, three months after the annual accounts had been
prepared and in accordance with the partnership agreement, his share of the
profits to the date of death was estimated on the basis of the profit for the
preceding year. In addition to this, the agreement provided for interest on
capital at 5 percent per annum on the balance standing to the credit of the
capital account at the date of the last Balance Sheet, and also for goodwill,
which was to be brought into account at two year’s purchase of the average
profits for the last three years.
A’s capital on 31st March, 2018 stood at ₹ 1,20,000, and his drawings from
then to the date of death amounted to ₹ 9,000.
The net profits of the business for the three preceding years amounted to ₹
33,500; ₹ 41,500 and ₹ 40,500, respectively.
You are required to prepare A's Capital Account as at the date of death, for a
settlement with his executors.
Aman, Raman and Suman
were partners sharing profits the ratio of 3 : 2 : 1 respectively. The profit
and sales for the year ended 31 March, 2017 were ₹ 3 lakh and ₹ 10
lakh respectively. Aman died on 30th November, 2017. Calculate the share of
deceased partner in the profits for the period from 1st April, 2017 to 30th
November, 2017, if the same is calculated:
- On the basis of sales which
were ₹ 8 lakh from 1st April, 2017 to 30th November, 2017
- On the basis of Time.
Also, pass the
necessary journal entry for the share.
P, Q and R were in
partnership sharing profits and losses in the ratio of 2 :3 :1. Q retired
from the firm. After all the adjustments, his Capital Account shows a credit
balance of ₹ 2,20,000 as on 1st April 2017. Q is to be paid
₹ 60,000 by cheque immediately and balance in four equal semi-annual
instalments along with interest @ 10% p.a. on the unpaid amount. Prepare Q's
Loan Account till he is paid the amount due to him. The firm closes its books
on 31st March every year.
P, Q and R were
partners in a firm sharing profits in 2 : 2 : 1 ratio. The Partnership Deed
provided that on the death of a partner his executors will be entitled to the
following:
- Interest on Capital @ 12% p.a.
- Interest on Drawings @ 18% p.a.
- Salary of ₹ 12,000 p.a.
- Share in the profit of the firm
(up to the date of death) on the basis of previous year's profit.
P died on 31st May,
2018. His capital was ₹ 80,000. He had withdrawn ₹ 15,000 and
interest on his drawings was calculated as ₹ 1,200. Profit of the firm for
the previous year ended 31st March, 2018 was ₹ 30,000.
Prepare P's Capital Account to be rendered to his executors.
[2008]
Brown and Smith are
partners. The partnership deed provides:
- That the Accounts be balanced
on 31st December each year.
- That the profits be divided as
follows: Brown 1/2; Smith 1/3 and carried to a Reserve account 1/6.
- That in the event of the death
of a partner, his executors be entitled to be paid out:
- The Capital to his credit at
the date of death.
- His proportion of Reserve at
the date of last Balance Sheet.
- His proportion of profit to
date of death based on the average profits of the last three completed
years.
- By way of goodwill his
proportion of the total profits for the three preceding years.
On 31st December,
2017, the ledger balances were:
|
|
₹ |
₹ |
|
Brown's Capital |
|
9,000 |
|
Smith's Capital |
|
6,000 |
|
Reserve |
|
3,000 |
|
Creditors |
|
3,000 |
|
Bills Receivable |
2,000 |
|
|
Investments |
5,000 |
|
|
Cash |
14,000 |
|
|
|
21,000 |
21,000 |
The profits for three
years were:
2015 ₹ 4,200; 2016 ₹ 3,900; 2017 ₹ 4,500. Smith died on 1st May,
2018. Show the accounts as between the firm and Smith’s executors as on May
1st, 2018.
A, B and C are equal
partners in a firm whose books are closed on 31st March every year. Give
Journal entry to distribute General Reserve of ₹ 40,000 at the time of
retirement of B when 25% of the balance of General Reserve is to be transferred
to Investments Fluctuation Reserve.
X, Y and Z were
partners sharing profits and losses in the ratio of 3:2:1. Y died on 30th June,
2018. Profit from 1st April, 2018 to 30th June, 2018 was ₹ 3,60,000. X and
Z decided to share the future profits in the ratio of 3 :2 respectively with
effect from 1st July 2018.
Pass the necessary Journal entries to record Y's share of profit up to the date
of death.
Sita, Reeta and Geeta
are partners in firm sharing profits and losses in the ratio of 4 : 3 :1. As
per the terms of Partnership Deed on the death of any partner, Goodwill was to
be valued at 50% of the net profits credited to that Partner's Capital Account
during the last three completed years before her death. Sita died on 28th
February 2012. The profits for the last five years were: 2007 - ₹ 60,000;
2008 - ₹ 97,000; 2009 - ₹ 1,05,000; 2010
- ₹ 30,000 and 2011 - ₹ 84,000.
On the date of Sita's death, Building was found undervalued by ₹ 80,000,
which was to be considered. Calculate amount of Sita's share of Goodwill in the
firm and record the adjustment Journal entries of Goodwill and revaluation of
Building. The new profit-sharing ratio between Reeta and Geeta will be equal.
[2012]
L, M and O are
partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and
the goodwill is valued at ₹ 72,000. Calculate M's share of goodwill
and pass the Journal entry for Goodwill. L and O decided to share the future
profits and losses in the ratio of 5:3.
X, Y and Z are
partners sharing profits in the ratio of 3 : 2 : 1. Y retires and X and Z
decide to share the future profits in the ratio of 3 : 2. Goodwill of the firm
is valued at ₹ 1,50,000. Fill in the missing figures in the following
Journal entries:
JOURNAL
|
Date |
Particulars |
|
L.F |
Dr.
(₹) |
Cr.
(₹) |
|
|
X's Capital A/c |
Dr. |
|
? |
|
|
|
Y's Capital A/c |
Dr. |
|
? |
|
|
|
Z's Capital A/c |
Dr. |
|
? |
|
|
|
To Goodwill A/c |
|
|
|
60,000 |
|
|
(Being the existing goodwill
written off) |
|
|
|
|
|
|
X's Capital A/c |
Dr. |
|
? |
|
|
|
Z's Capital A/c |
Dr. |
|
? |
|
|
|
To Y's Capital A/c |
|
|
|
? |
|
|
(Being Y's share of goodwill
adjusted by debiting gaining partners X and Z in their gaining ratio) |
|
|
|
|
A, B and C were
partners in a firm. B died on 31st August, 2018. B’s share of profit from the
closure of the last accounting year till the date of death was to be calculated
on the basis of the average of three completed years of profits before death.
Profits for the years ending 3 1st March 2016, 2017 and 2018 were ₹ 40,000; ₹
50,000 and ₹ 72,000 respectively. The firm closes its books on 31st March every
year. Calculate B’s share of profit till the date of her death and pass the
necessary journal entry for the same assuming:
- there is no change in the
profit sharing ratio of A and C;
- there is change in the
profit-sharing ratio of A and C and the new ratio is 7 : 5.
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 ₹ 1,40,000 and that of C
₹ 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.
X, Y and Z were
partners in a firm sharing profits in the ratio of 5 : 3 : 2. The firm closes
its books on 31st March, every year. On 30th September, 2016, Z died. The
Partnership Deed provided that on the death of a partner his executors will be
entitled to the following:
- Balance in his Capital Account
and Interest on Capital @ 12% per annum. On 1st April, 2016, balance in
Z's Capital Account was ₹ 80,000.
- His share in the profits of the
firm in the year of his death, which will be calculated on the basis of
rate of net profit on sales of the previous year which was 25%. The sales
of the firm till 30th September, 2016 were ₹ 4,00,000.
- His share in the goodwill of
the firm. The goodwill of the firm on Z's death was valued at
₹ 3,00,000.
The Partnership Deed
also provided that the following deductions will be made from the amount
payable to the executor of the deceased partner:
- His drawings in the year of his
death. Z had withdrawn ₹ 30,000 till 30th September, 2016.
- Interest on drawings @ 12% per
annum which was calculated as ₹ 2,000.
The accountant of the
firm prepared Z's Capital Account to be presented to his executor but in a
hurry did not complete it. Z's Capital Account as prepared by the firm's
accountant is presented below:
Z's CAPITAL ACCOUNT
|
Dr. |
Cr. |
||||
|
Date |
Particulars |
₹ |
Date |
Particulars |
₹ |
|
2016 |
|
|
2016 |
|
|
|
Sept. 30 |
? |
30,000 |
April 1 |
? |
80,000 |
|
Sept. 30 |
? |
2,000 |
Sept. 30 |
? |
4,800 |
|
Sept. 30 |
? |
? |
Sept. 30 |
? |
20,000 |
|
|
|
|
Sept. 30 |
? |
? |
|
|
|
|
Sept. 30 |
? |
? |
|
|
|
1,64,800 |
|
|
1,64,800 |
You are required to
complete Z's Capital Account.
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