Retirement of a partner (Question Bank)

Retirement of a partner 

Leena, Madan and Naresh were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 3 . On 31st March, 2015 their balance sheet was as follows

Balance Sheet
as on 31st March, 2015

Liabilities		Amount (Rs)	Assets	Amount (Rs)
Trade Creditors		1,60,000	Land and Building	10,00,000
Bank Overdraft		44,000	Machinery	5,00,000
Long-term Debts		4,00,000	Furniture	7,00,000
Employee's Provident Fund		76,000	Investments	2,00,000
Capital A/cs			Closing Stocks	8,00,000
Leena	12,50,000		Sundry Debtors	4,00,000
Madan	8,00,000		Bank	80,000
Naresh	10,50,000	31,00,000	Deferred Advertisement	1,00,000
		37,80,000 ========		37,80,000 =========

On 31st March, 2015, Madan retired from the firm and the remaining partners decided to carry on the business. It was decided to revalue assets and liabilities as under

1. Land and building be appreciated by Rs 2,40,000 and machinery be depreciated by 10%.
2. 50% of investments were taken over by the retiring partner at book value.
3. An old customer Mohit whose account was written off as bad debt had promised to pay Rs 7,000 in settlement of his full debt of Rs 10,000.
4. Provision for doubtful debts was to be made at 5% on debtors.
5. Closing stock will be valued at market price which is Rs 1,00,000 less than the book value.
6. Goodwill of the firm be valued at Rs 5,60,000 and Madan’s share of goodwill be adjusted in the accounts of Leena and Naresh. Leena and Naresh decided to share future profits and losses in the ratio of 3: 2.
7. The total capital of the new firm will be Rs 32,00,000 which will be in the proportion of the profit sharing ratio of Leena and Naresh.
8. Amount due to Madan was settled by accepting a bill of exchange in his favour payable after 4 months

Prepare revaluation account, partners’ capital accounts and balance sheet of the firm after Madan’s retirement.

[2016]

 

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Gita, Radha and Garv were partners in a firm sharing profits and losses in the ratio of 3:5:2. On 31st March, 2019, their balance sheet was as follows:

Balance Sheet of Gita, Radha & Garv as on 31st March, 2019 

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	60,000	Cash	50,000
General Reserve	40,000	Stock	80,000
Capitals :		Debtors	40,000
Gita  3,00,000		Investments	30,000
Radha 2,00,000		Buildings	5,00,000
Garv  1,00,000	6,00,000
	7,00,000		7,00,000

Radha retired on the above date and it was agreed that:

1. Goodwill of the firm be valued at ₹ 3,00,000 and Radha’s share be adjusted through the capital accounts of Gita and Garv.
2. Stock was to be appreciated by 20%.
3. Buildings were found undervalued by ₹ 1,00,000 .
4. Investments were  sold for ₹ 34,000 .
5. Capital of the new firm was fixed at ₹ 5,00,000 which will be in the new profit sharing ratio of the partners; the necessary adjustments for this purpose were to be made by opening current accounts of the partners.

Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the reconstituted firm on Radha’s retirement.

[2020]

 

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Narang, Suri, and Bajaj are partners in the firm sharing profits and losses in the proportion of 1/2, 1/6 and 1/3 respectively. The Balance Sheet on 31st March 2010 was as follows :

Balance Sheet
as on 31st March 2010

Liabilities		Amt(Rs.)	Assets		Amt(Rs.)
Capital Accounts:			Freehold Premises		40,000
Narang	30,000		Machinery		30,000
Suri	30,000		Furniture		12,000
Bajaj	28,000	88,000	Stock		22,000
Bills Payable		12,000	Sundry Debtors	20,000
			Less: Provision for Bad Debts	1,000	19,000
Sundry Creditors		18,000	Cash		7,000
		1,30,000			1,30,000

Bajaj retires from the business on the above date and the partners agree to the following:

1. Freehold premises and stock are to be appreciated by 20% and 15% respectively.
2. Machinery and furniture are to be depreciated by 10% and 7% respectively.
3. Provision for Bad debts is to be increased to Rs 1,500.
4. Goodwill is valued at Rs 21,000 on Bajaj’s retirement.
5. The continuing partners have decided to adjust their capitals in their new profit-sharing ratio after the retirement of Bajaj. The surplus/deficit, if any, in their capital accounts will be adjusted through their current accounts.

Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

 

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A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. Their Balance Sheet as at 31st March, 2018 was as follows:

Liabilities		₹	Assets		₹
Sundry Creditor		20,000	Cash		6,400
Expenses Owing		5,000	Debtors	20,000
Reserve Fund		18,000	Less: Provision	400	19,600
Capitals:			Stock		30,000
A	60,000		Patents		8,000
B	50,000		Machinery		1,20,000
C	40,000	1,50,000	Goodwill		9,000
		1,93,000			1,93,000

B retired on the above date upon the following terms:

1. Goodwill of the firm be valued at ₹ 63,000.
2. Machinery be written down by 10% and the patents written up by 25%.
3. Provision for doubtful debts be brought upto 5% on debtors and a provision of 212%212% on creditors be made for discount.
4. Expenses owing are to be brought down to ₹ 3,900.
5. B is to be paid ₹ 30,000 immediately, which is to be contributed by A and C in their new profit sharing ratio which is 3 : 2.

Give journal entries to record the above and the Balance Sheet of the firm after B's retirement.

 

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Manoj, Naveen and Deepak were partners sharing profits and losses in the ratio of 4 : 3 : 2. As at 1st April 2018, their Balance Sheet was as follows:

Liabilities		₹	Assets		₹
Trade Creditors		7,000	Cash in hand		5,900
Capitals:			Debtors	19,000
Manoj	50,000		Less: Provision	1,400	17,600
Naveen	39,000		Stock		13,500
Deepak	30,000	1,19,000	Plant and Machinery		18,000
			Motor Car		20,000
			Buildings		48,000
			Goodwill		3,000
	1,26,000				1,26,000

Deepak retired on the above date as per the following terms:

1. Goodwill of the firm was valued at ₹ 21,000.
2. Stock to be appreciated by 10%.
3. Provision for doubtful debts should be 5% on debtors.
4. Machinery is to be valued at 5% more than its book value.
5. Motor Car is revalued at ₹ 15,500. Retiring partner took over Motor Car at this value.
6. Deepak be paid ₹ 2,000 in cash and balance be transferred to his loan account.

Show necessary journal entries. Prepare Revaluation Account, Capital Accounts and Opening Balance Sheet of continuing partners.

 

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'G’, 'E’ and ‘F’ were partners in the firm sharing profits in the ratio of 7: 2: 1. The Balance Sheet of the firm as on 31st March, 2011 was as follows :

Balance Sheet of 'G', ‘E’ and ‘F’ as at 31st March, 2011

Liabilities		Amt(Rs.)	Assets	Amt(Rs.)
Capitals:			Goodwill	40,000
G	70,000		Land and Buildings	60,000
E	20,000		Machinery	40,000
F	10,000	1,00,000	Stock	7,000
General Reserve		20,000	Debtors	12,000
Loan from 'E'		30,000	Cash	5,000
Creditors		14,000
		1,64,000		1,64,000

‘E’ died on 24th August 2011. Partnership deed provides for the settlement of claims on the death of a partner in addition to his capital as under:

1. The share of profit of deceased partner to be computed up to the date of death on the basis of average profits of the past three years which were 180,000.
2. His share in profit/loss on revaluation of assets and reassessment of liabilities which were as follows:
   Land and Buildings were revalued at Rs. 94,000, Machinery at Rs. 38,000 and Stock at Rs. 5,000. A provision of 21212% was to be created on debtors for bad and doubtful debts.
3. The net amount payable to ‘E’s executor was transferred to his Loan Account, to be paid later on.

Prepare Revaluation Account, Partners’ Capital Accounts, E’s Executor A/c and Balance Sheet of ‘G’ and ‘F who decided to continue the business keeping their capital balances in their new profit-sharing ratio. Any surplus or deficit to be transferred to current accounts of the partners.

[2012]

 

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A, B and C were partners in a firm whose Balance Sheet as at 31st March, 2018 was as below:

Liabilities		₹	Assets	₹
Creditors		7,096	Cash at Bank	6,496
General Reserve		3,000	Debtors	9,000
Capitals: A	8,000		Stock	10,600
B	6,000		Furniture	2,000
C	4,000	18,000
		28,096		28,096

B retired on that date and in this connection, it was decided to make the following adjustments:

1. To reduce stock and furniture by 5% and 10% respectively; and
2. To provide for doubtful debts at 5% on debtors.

Rent outstanding (not provided for as yet) was ₹ 260. Goodwill was valued at ₹ 4,200. A and C decided:

1. To share profits and losses in 5 : 3 respectively;
2. To re-adjust their capitals in the profit-sharing ratio; and
3. To bring insufficient cash to pay off B immediately and to leave a balance of ₹ 1,000 in the Bank. B was paid off.

Give Journal entries to record the above and draft the Balance Sheet of the new firm.

 

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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:

In The Books of Arti, Bharti, and Seema Balance Sheet as on March 31, 2016
Liabilities		Amount ₹	Assets	Amount ₹
Bills Payable		12,000	Buildings	21,000
Creditors		14,000	Cash in Hand	12,000
General Reserve		12,000	Bank	13,700
Capitals:			Debtors	12,000
Arti	20,000		Bills Receivable	4,300
Bharti	12,000		Stock	1,750
Seema	8,000	40,000	Investment	13,250
		78,000		78,000

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

1. The capital to her credit at the time of her death and interest thereon @ 10% per annum.
2. Her proportionate share of reserve fund.
3. Her share of profits for the intervening period will be based on the sales during that period, which were calculated as ₹ 1,00,000. The rate of profit during past three years had been 10% on sales.
4. 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 – ₹ 8,200
   2014 – ₹ 9,000
   2015 – ₹ 9,800
   The investments were sold for ₹ 16,200 and her executors were paid out. Pass the necessary journal entries and write the account of the executors of Bharti.

[[NCERT Textbook]]

 

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The Balance Sheet of Ram, Shyam, and Hari as at 31.3.2003 stood as follows:

Balance Sheet
as at 31.3.2003

Liabilities	Amt(Rs.)	Assets		Amt(Rs.)
Creditors	24,400	Cash		1,00,000
Bills Payable	90,000	Debtors	30,000
General Reserve	24,000	Less: Provision	1,600	28,400
Investment Fluctuation Reserve	2,000	Stock		4,000
Profit and Loss Account	3,000	Computers		9,000
Ram's Capital	51,000	Building		1,00,000
Shyam's Capital	40,000	Investments		30,000
Hari's Capital	40,000	Goodwill		3,000
	2,74,400			2,74,400

Hari retired on 1.4.2003 and the following adjustments were agreed upon:

1. The building is appreciated by Rs 10,000.
2. Investments are valued 10% less than the book value.
3. All Debtors were good.
4. Stock be reduced to 93%.
5. Goodwill is valued at one year’s purchase of the average profit of the past three years. It was decided not to show goodwill in the balance sheet of the reconstituted firm.
6. Hari shall be paid Rs 13,440 immediately and the balance in four equal yearly installments together with interest @ 10% p.a.
7. New ratio of Ram and Shyam would be 2:1.

The profit for the year 2000-01 and 2001-02 were Rs 9,000 and Rs 6,000 respectively. Prepare Revaluation Account, Partners’ Capital Accounts, Hari’s Loan Account (till it is paid off) and Balance Sheet as at 1.4.2003 (figure may be rounded off to nearest one rupee.)

 

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Xavier, Yusuf and Zaman were partners in a firm sharing profits in the ratio of 4 : 3 : 2. On 1st April, 2014 their balance sheet was as follows:

Balance Sheet
as on 1st April 2014

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Sundry Creditors		41,400	Cash at Bank		33,000
Capital A/cs			Sundry Debtors	30,450
Xavier	1,20,000		(-)Provision for Doubtful Debts	1,050	29,400
Yusuf	90,000		Stock		48,000
Zaman	60,000	2,70,000	Plant and Machinery		51,000
			Land and Building		1,50,000
		3,11,400 =======			3,11,400 ========

Yusuf had been suffering from ill health and thus gave notice of retirement from the firm. An agreement was, therefore, entered into as on 1st April, 2014, the terms of which were as follows:

1. The land and building be appreciated by 10%.
2. The provision for bad debts is no longer necessary.
3. The stock be appreciated by 20%.
4. The goodwill of the firm be fixed at Rs 54,000. Yusuf's share of the same be adjusted into Xavier’s and Zaman’s capital accounts, who are going to share future profits in the ratio of 2: 1.
5. The entire capital of the newly constituted firm be readjusted by bringing in or paying necessary cash so that the future capitals of Xavier and Zaman will be in their profits sharing ratio.

Prepare revaluation account and partners' capital accounts.

[2015]

 

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X, Y and Z are partners sharing profits and losses in the ratio of 3:2:1. Balance Sheet of the firm as at 31 st March, 2019 was as follows:

Liabilities		₹	Assets		₹
Creditors		21,000	Cash at Bank		5,750
Workmen Compensation Reserve		12,000	Debtors	40,000
Investments Fluctuation Reserve		6,000	Less: Provision for Doubtful Debts	2,000	38,000
Capital A/cs;			Stock		30,000
X	68,000		Investment (Market Value ₹ 17,600)		15,000
Y	32,000		Patents		10,000
Z	21,000	1,21,000	Machinery		50,000
			Goodwill		6,000
			Advertisement Expenditure		5,250
		1,60,000			1,60,000

Z retired on 1 st April, 2019 on the following terms:

1. Goodwill of the firm is to be valued at ₹ 34,800.
2. Value of Patents is to be reduced by 20% and that of machinery to 90%.
3. Provision for doubtful debts is to be created @ 6% on debtors.
4. Z took over the investment at market value.
5. Liability for Workmen Compensation to the extent of ₹ 750 is to be created.
6. A liability of ₹ 4,000 included in creditors is not to be paid.
7. Amount due to Z to be paid as follows: ₹ 5,067 immediately, 50% of the balance within one year and the balance by a draft for 3 Months.

Give necessary Journal entries for the treatment of goodwill, prepare Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.

 

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J, H and K were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2015 their balance sheet was as follows

Balance Sheet
as on 31st March, 2015

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		42,000	Land and Building		1,24,000
Investment Fluctuation Fund		20,000	Motor Vans		40,000
Profit and Loss A/c		80,000	Investments		38,000
Capital A/cs			Machinery		24,000
J	1,00,000		Stock		30,000
H	80,000		Debtors	80,000
K	40,000	2,20,000	(-) Provision for Doubtful Debts	(6,000)	74,000
			Cash		32,000
		3,62,000 =======			3,62,000 ========

On the above date, H retired and J and K agreed to continue the business on the following terms

1. Goodwill of the firm was valued at Rs 1,02,000.
2. There was a claim of Rs 8,000 for workmen’s compensation.
3. Provision for bad debts was to be reduced by Rs 2,000.
4. H will be paid Rs 14,000 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly instalments together with interest @ 10% per annum.
5. The new profit sharing ratio between J and K will be 3 : 2 and their capitals will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts.

Prepare revaluation account, partners’ capital accounts and balance sheet of the new firm.

[2016]

 

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Mohan, Vinay, and Nitya were partners in a firm sharing profits and losses in the proportion of 12,1312,13 and 1616 respectively. On 31^st March 2018, their Balance Sheet was as follows:

Balance Sheet of Mohan, Vinay, and Nitya as at 31^st March 2018

Liabilities		Amount (Rs.)	Assets		Amount (Rs.)
Creditors		48,000	Cash at Bank		31,000
Employee's Provident Fund		1,70,000	Bills Receivable		54,000
Contingency Reserve		30,000	Book Debts	63,000
Capitals :			Less: Provision for doubtful debts	2,000	61,000
Mohan	1,20,000		Plant and Machinery		1,20,000
Vinay	1,00,000		Land and Building		2,92,000
Nitya	90,000	3,10,000
		5,58,000			5,58,000

Mohan retired on the above date and it was agreed that:

1. Plant and machinery will be depreciated by 5%.
2. An old computer previously written off was sold for Rs.4,000.
3. Bad debts amounting to Rs.3,000 will be written off and a provision of 5% on debtors for bad and doubtful debts will be maintained.
4. Goodwill of the firm was valued at Rs.1,80,000 and Mohan’s share of the same was credited in his account by debiting Vinay’s and Nitya’s accounts.
5. The capital of the new firm was to be fixed at Rs.90,000 and necessary adjustments were to be made by bringing in or paying off cash as the case may be.
6. Vinay and Nitya will share future profits in the ratio of 3 : 2.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.

[2019]

 

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A, B and C were partners sharing profits in the ratio 5: 3: 2 respectively. Their summarised balance sheet was as follows :

Balance Sheet

Liabilities		Amt(Rs)	Assets	Amt(Rs)
Capital Accounts			Goodwill	80,000
A	2,80,000		Machinery	3,60,000
B	2,00,000		Debtors	1,40,000
C	1,20,000	6,00,000	Stock	1,80,000
Current Liabilities		1,84,000	Cash	24,000
		7,84,000		7,84,000

C retired on 1.4.2009. It was agreed that :

1. Machinery is revalued at Rs. 4,80,000.
2. C’s interest in the firm is valued at Rs 1,88,000 after taking into consideration revaluation of assets, liabilities and accumulated profits/losses etc.
3. The entire sum payable to C is to be brought in by A and B in such a way that their capital should be in their new profit sharing ratio of 2: 1.
4. A cash balance of Rs 17,000 should be kept in the firm as a minimum balance.

Prepare revaluation account, partners’ capital accounts, and balance sheet of the new firm.

 

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B, C and D were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st December, 2008, their balance sheet was as follows:

Balance Sheet
as on 31st December, 2008

Liabilities		₹	Assets	₹
Creditors		43,000	Cash	10,200
Bills Payable		17,000	Stock	24,500
General Reserve		70,000	Debtors	27,300
Capitals:			Land and Building	1,40,000
B	40,000		Profit and Building	70,000
C	50,000
D	52,000	1,42,000
		2,72,000		2,72,000

B died on 31st March, 2009. The partnership deed provided for the following on the death of a partner.

1. Goodwill of the firm was to be valued at 3 years’ purchase of the average profits of last 5 years. The total profits for the years ending 31st December, 2007, 31st December, 2006, 31st December, 2005 and 31st December, 2004 were Rs 70,000, Rs 60,000, Rs 50,000 and Rs 40,000 respectively.
2. B’s share of profit or loss till the date of his death was to be calculated on the basis of the profits or loss for the year ending 31st December, 2008.

You are required to calculate the following

1. Goodwill of the firm and B’s share of goodwill at the time of his death.
2. B’s share in the profit and loss of the firm till the date of his death.

Prepare B’s capital account at the time of his death to be presented to his executor.

[2010]

 

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X, Y and Z were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2019 their balance sheet was as follows

Balance Sheet
as at 31st March, 2019

Liabilities		Amt (Rs)	Assets		Amt (Rs)
Creditors		21,000	Land and Building		62,000
Investment Fluctuation Fund		10,000	Motor Vans		20,000
Profit and Loss A/c		40,000	Investments		19,000
Capital A/cs			Machinery		12,000
X	50,000		Stock		15,000
Y	40,000		Debtors	40,000
Z	20,000	1,10,000	(-) Provision for Doubtful Debts	(3,000)	37,000
			Cash		16,000
		1,81,000			1,81,000

On the above date Y retired and X and Z agreed to continue the business on the following terms

1. Goodwill of the firm was valued at Rs 51,000.
2. There was a claim of Rs 4,000 for workmen’s compensation.
3. Provision for bad debts was to be reduced by Rs 1,000.
4. Y will be paid Rs 8,200 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly instalments together with interest @ 10% per annum.
5. The new profit sharing ratio between X and Z will be 3 : 2 and their capitals will be m their new profit sharing ratio. The capital adjustments will be done by opening current accounts.

Prepare revaluation account, partners’ capital accounts and the balance sheet of the reconstituted firm.

[2016]

 

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L, M and N were partners in a firm sharing profits in the ratio of 2 : 1 : 1. On 1st April, 2013 their balance sheet was as follows:

Balance Sheet
as at 1st April, 2013

Liabilities	Amount (Rs)	Assets	Amount (Rs)
General Reserve	4,40,000	Land	8,00,000
Workmen's Compensation Fund	3,60,000	Building	6,00,000
Creditors	2,40,000	Furniture	2,40,000
Capital A/cs		Debtors                                                                      4,00,000
L                                                                                6,00,000		(-) Provision for Doubtful Debts                                    20,000	3,80,000
M                                                                               4,80,000		Stock	4,40,000
N                                                                                4,80,000	15,60,000	Cash	1,40,000
	26,00,000 ========		26,00,000 =======

On the above date, N retired. The following were agreed:

1. Goodwill of the firm was valued at Rs 6,00,000.
2. Land was to be appreciated by 40% and building was to be depreciated by Rs 1,00,000.
3. Furniture was to be depreciated by Rs 30,000.
4. The liabilities for workmen’s compensation fund was determined at Rs 1,60,000.
5. Amount payable to N was transferred to his loan account.
6. Capitals of L and M were to be adjusted in their new profit sharing ratio and for this purpose current accounts of the partners will be opened.

Prepare revaluation account, partner's capital accounts and the balance sheet of the new firm.

[2014]

 

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Sushma, Gautam, and Kanika were partners in a firm sharing profits in the ratio of 5:3:2. On 31st March, 2018, their Balance Sheet was as follows :

Balance Sheet of Sushma, Gautam and Kanika as at 31st March, 2018

Liabilities		Amount (Rs.)	Assets	Amount (Rs.)
Creditors		60,000	Cash at Bank	1,40,000
Employee's Provident Fund		40,000	Sundry Debtors	1,60,000
Profit and Loss Account		1,00,000	Stock	2,40,000
Capitals :			Investments	2,00,000
Sushma	3,00,000		Fixed Assets	3,60,000
Gautam	2,50,000
Kanika	3,50,000	9,00,000
		11,00,000		11,00,000

On the above date, Sushma retired and it was agreed that :

1. Fixed Assets will be reduced to Rs.2,90,000.
2. A provision of 5% on debtors for bad and doubtful debts will be created.
3. Stock was to be valued at Rs.2,18,000. Sushma took over the stock at this value.
4. Goodwill of the firm on Sushma’s retirement was valued at Rs.8,00,000. Sushma’s share of goodwill was treated by debiting Gautam and Kanika’s Capital Accounts.
5. Sushma was paid cash brought by Gautam and Kanika in such a way that their capitals became in profit sharing ratio and a balance of Rs.58,000 was left in the bank.
6. Gautam and Kanika will share the future profits in the ratio of 2:3.

Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the reconstituted firm.

[2019]

 

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A, B and C are partners in a trading firm. The firm has a fixed total capital of Rs. 60,000 held equally by all the partners. Under the partnership deed, the partners were entitled for the following:

1. A and B to a salary of Rs. 1,800 and Rs. 1,600 per month respectively.
2. In the event of the death of a partner, goodwill was to be valued at 2 years’ purchase of the average profit of the last 3 years.
3. Profit upto the date of death based on the profits of the previous year.
4. Partners were to be charged interest on drawings @ 5% per annum and allowed interest on capital @ 6% per annum.

A died on 1st January, 2011. His drawings to the date of death were Rs. 2,000 and the interest thereon was Rs. 60. The profits for the three years ending 31st March, 2008, 2009-and 2010 were Rs. 21,200, Rs. 3,200 (Dr) and Rs. 9,000 respectively.
Prepare capital account to calculate the amount to be paid to his executors.

[2011]

 

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Following is the Balance Sheet of A, B and C as at 31st March, 2014:

Liabilities	₹	Assets	₹
Sundry Creditors	18,000	Tools	6,000
Workmen Compensation Reserve	19,200	Furniture	48,000
Capital Accounts:		Stock	36,000
A	60,000	Debtors	36,000
B	30,000	Cash at Bank	30,000
C	30,000	Cash in hand	1,200
	1,57,200		1,57,200

B died on 30th June 2014. Under the partnership agreement, the executor of B was entitled to:

1. Amount standing to the credit of his Capital Account.
2. Interest on Capital which amounted to ₹ 375
3. His share of goodwill ₹ 21,000.
4. His share of profit from the closing of the last financial year to the date of death which amounted to ₹ 2,625.

B’s executor was paid ₹ 20,400 on 1st July 2014 and the balance in four equal yearly instalments starting from 30th June, 2015 with interest @ 6% p.a.
Pass the necessary Journal entries and draw up B’s Account to be rendered to his executor and B's Executor’s Account till it is finally paid.

 

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X, Y and Z were in partnership sharing profits in the ratio of 3:2:1. On 1 st April, 2015 the Balance Sheet of the firm stood as follows:

Liabilities		₹	Assets	₹
Provision for Doubtful Debts		1,300	Cash at Bank	10,000
Sundry Creditors		15,000	Debtors	16,000
Capitals:			Stock	20,000
X	78,750		Machinery	60,000
Y	70,000		Land and Building	1,20,000
Z	61,250	2,10,000
		2,26,300		2,26,300

Z retires on the above date and the new profit sharing ratio between X and Y will be 5 : 4. Following terms were agreed :

1. Land and Buildings be reduced by 10%.
2. Out of the insurance premium paid during the year ₹ 5,000 be carried forward as unexpired.
3. There is no need of any provision for doubtful debts.
4. Goodwill of the firm be valued at ₹ 54,000.
5. X and Y decided that their capitals will be adjusted in their new profit sharing ratio, by bringing in or paying cash to the partners. Z’s a/c will be transferred to his loan a/c.
1. Pass necessary journal entries; prepare the capital accounts and the new balance sheet.
2. Z is paid ₹ 9,300 on the date of retirement and the remaining amount in three equal instalments together with interest at the rate of 10% p.a. on the outstanding balance. Show Z’s loan a/c for 3 years.

 

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L, M and N were partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 1.4.2015 was as under:

Liabilities		₹	Assets	₹
Sundry Creditors		20,000	Cash	8,000
Reserves		9,000	Debtors	22,000
Capitals:			Stock	20,000
L	50,000		Machinery	67,000
M	30,000		Investments	12,000
N	20,000	1,00,000
		1,29,000		1,29,000

N died on 5th November, 2015 and according to the partnership deed his executors were entitled to be paid as under:

1. The capital to his credit at the time of his death and interest thereon @ 8% per annum.
2. His share of Reserves.
3. His share of profits for the intervening period will be based on the sales during that period, which were calculated as ₹ 2,40,000. The rate of profit during past 4 years had been 15% on sales.
4. Goodwill according to his share of profit to be calculated by taking thrice the amount of the average profit of the last four years less 25%. The profits of the previous years were:

2012	₹ 10,500
2013	₹ 12,000
2014	₹ 12,500
2015	₹ 13,000

The investments were sold at par and his executors were paid out. Pass the necessary journal entries and write the account of the executors of N.

 

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Lokesh, Mansoor and Nihal were partners in a firm sharing profits as 50%, 30% and 20% respectively. On 31st March, 2014, their balance sheet was as follows:

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Creditors	34,000	Cash	68,000
Provident Fund	10,000	Stock	38,000
Investment Fluctuation Fund	20,000	Debtors                                                           94,000
Capital A/cs:		(-) Provision                                                      6,000	88,000
Lokesh                                              1,40,000		Investments	80,000
Mansoor                                               80,000		Goodwill	40,000
Nihal                                                     50,000	2,70,000	Profit and Loss	20,000
	3,34,000 =========		3,34,000 ========

On the above date, Mansoor retired and Lokesh and Nihal agreed to continue on the following terms:

1. Firm’s goodwill was valued at Rs 1,02,000 and it was decided to adjust Mansoor’s share of goodwill into the capital accounts of the continuing partners.
2. There was a claim for workmen’s compensation to the extent of Rs 12,000 and investments were brought down to Rs 30,000.
3. Provision for bad debts was to be reduced by Rs 2,000.
4. Mansoor was to be paid Rs 20,600 in cash and the balance will be transferred to his loan account which was paid in two equal instalments together with interest @ 10% per annum.
5. Lokesh’s and Nihal’s capitals were to be adjusted in their new profit sharing ratio by bringing in or paying off cash as the case may be.

Prepare revaluation account and partners’ capital accounts.

[2015]

 

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Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 12,1312,13 and 1616 respectively. Chander retired on 1st April, 2014. The balance sheet of the firm on the date of Chander’s retirement was a follows

Balance Sheet
as on 1st April, 2014

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Sundry Creditors		12,600	Bank		4,100
Provident Fund		3,000	Debtors	30,000
General Reserve		9,000	(-)Provision for Doubtful Debts	(1,000)	29,000
Capital A/cs			Stock		25,000
Amit	40,000		Investments		10,000
Balan	36,500		Patents		5,000
Chander	20,000	96,500	Machinery		48,000
		1,21,100 ========			1,21,100 =======

It was agreed that:

1. Goodwill will be valued at Rs 27,000.
2. Depreciation of 10% was to be provided on machinery.
3. Patents were to be reduced by 20%.
4. Liability on account of provident fund was estimated at Rs 2,400.
5. Chander took over investments for Rs 15,800.
6. Amit and Balan decided to adjust their capitals in proportion of their profit sharing ratio by opening current accounts.

Prepare revaluation account and partners’ capital accounts on Chander’s retirement.

[2015]

 

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X, Y, and Z were partners sharing profits in the ratio 3: 2: 1. On 31st March 2008, their Balance Sheet stood as under :

Liabilities		Amt(Rs.)	Assets	Amt(Rs.)
Capitals:			Cash at Bank	70,000
X	75,000		Investments	50,000
Y	70,000		Patents	15,000
Z	50,000	1,95,000	Stock	25,000
Creditors		72,000	Debtors	20,000
General Reserve		24,000	Buildings	75,000
			Machinery	36,000
		2,91,000		2,91,000

Z died on May 31st, 2008. It was agreed that

1. Goodwill was valued at 3 years’ purchase of the average profits of the last five years, which were 2003: Rs. 40,000; 2004: Rs. 40,000; 2005: Rs. 30,000; 2006: Rs. 40,000 and 2007: Rs. 50,000.
2. Machinery was valued at Rs. 70,000, Patents at Rs. 20,000 and Buildings at Rs. 66,000.
3. For the purpose of calculating Z’s share of profits until the date of death, it was agreed that the same be calculated based on the average profits for the last 2 years.
4. The executor of the deceased partner is to be paid the entire amount due by means of a cheque.

Prepare Z’s Capital Accounts to be rendered to the executor and also a journal entry for the settlement of the amount due to Z’s executor.

[2009]

 

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The Balance Sheet of M/S A, B and C showed as follows:
 

Liabilities		₹	Assets		₹
Trade Creditors		7,000	Freehold Property		49,000
Capitals Accounts:			Plant		15,000
A	22,575		Stock		5,500
B	30,000		Sundry Debtors	6,250
C	18,500	71,075	Less: Bad Debt Provision	100	6,150
			Cash at Bank		2,425
		78,075			78,075

B agrees to take over the business, A and C retiring on the following terms :

1. That the goodwill of the firm be valued at ₹15,000
2. That plant and stock be reduced by 10%.
3. That freehold property be appreciated by ₹ 1,000.
4. That Provision for doubtful debts be brought up to ^250.
5. B has to bring in sufficient cash to pay offA and C The partners used to share profits in the proportion of 2/5, 2/5 and 1/5.

Show the necessary Journal entries, Partner’s Capital Accounts and Balance Sheet of B after the retirement of A and C.

 

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A, B and C were in partnership sharing profits in proportion to their capitals. Their Balance Sheet as at 31-3-2018 was as follows:

Liabilities	₹	Assets		₹
Creditors	15,600	Cash		16,000
Reserve	6,000	Debtors	20,000
A's Capital	90,000	Less: Provision for Doubtful Debts	400	19,600
B's Capital	60,000	Stock		18,000
C's Capital	30,000	Machinery		48,000
		Buildings		1,00,000
	2,01,600			2,01,600

On the above date B retired owing to ill health and the following adjustments were
agreed upon:

1. Buildings be appreciated by 10%.
2. Provision for bad and doubtful debts be increased to 5% on debtors.
3. Machinery be depreciated by 15%.
4. Goodwill of the firm be valued at ₹ 36,000 and be adjusted into the Capital Accounts of A and C who will share profits in future in the ratio of 3 : 1.
5. A provision be made for outstanding repairs bill of ₹ 3,000.
6. Included in the value of creditors is ₹ 1,800 for an outstanding legal claim, which is not likely to arise.
7. Out of the insurance premium paid ₹ 2,000 is for the next year. The amount was debited to P & L A/c.
8. The partners decide to fix the capital of the new firm as  ₹ 1,20,000 in the profit-sharing ratio.
9. B to be paid ₹ 9,000 in cash and the balance to be transferred to his Loan Account.

Prepare the Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the new firm after B's retirement.

 

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Ram, Krishna and Mohan are partners in a firm, sharing profits and losses in the ratio of 3 : 5 : 2. On 31st March, 2014, their Balance Sheet was as under:

BALANCE SHEET
as at 31st March, 2014

Liabilities		₹	Assets	₹
Creditors		39,200	Land and Building	48,000
General Reserve		16,000	Plant	72,000
Capital A/cs:			Inventory	34,000
Ram	76,800		Trade Marks	26,400
Krishna	69,600		Bills Receivables	39,200
Mohan	54,000	2,00,400	Cash in Hand	24,000
			Advertisement Suspense	12,000
		2,55,600		2,55,600

Krishna died on 30th September, 2014. An agreement was reached amongst Ram, Mohan and Krishna’s legal representative that:

1. Goodwill to be valued at 2 year’s purchase of the average profits of the previous three years, which were:

Year:	2011-12	2012-13	2013-14
Profit:	₹ 31,200	₹ 28,800	₹ 36,000

2. Trademarks to be revalued at ₹ 9,200; plant at 80% of its book value and land building at ₹ 57,600.
3. Krishna’s share of profit to the date of his death to be calculated on the basis of previous year’s profit.
4. Interest on capital to be provided @ 10% per annum.
5. ₹ 60,080 to be paid in cash to Krishna’s legal representative and balance to be transferred to the legal representative’s loan account.

You are required to prepare:

1. Revaluation Account.
2. Krishna’s Capital Account, and
3. Krishna’s Legal Representative’s Account.

 

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Radha, Manas and Arnav were partners in a firm sharing profits and losses in the ratio of 3 : 1 : 1. Their Balance Sheet as at 31st March, 2019 was as follows:

Balance Sheet of Radha, Manas and Arnav as at 31st March, 2019

Liabilities		Amount ₹	Assets		Amount ₹
Capitals:			FurnituRe		4,60,000
Radha	4,00,000		Investments		2,00,000
Manas	3,00,000		Stock		2,40,000
Arnav	2,00,000	9,00,000	Debtors	2,20,000
Investment Fluctuation Fund		1,10,000	Less provision for doubtful debts	10,000	2,10,000
Creditors		2,50,000	Cash		1,50,000
		12,60,000			12,60,000

Manas retired on 1st April, 2019. It was agreed that:

1. Stock was to be appreciated by 20 %
2. Provision for doubtful debts was to be increased to ₹ 15,000.
3. Value of furniture was to be reduced by ₹ 3,000.
4. Market value of investments was ₹ 1,90,000.
5. Goodwill of the firm was valued at ₹ 2,00,000 and Manas's share was adjusted in the accounts of Radha and Arnav.
6. Manas was paid ₹ 68,000 in cash and the balance was transferred to his loan account.
7. Capitals of Radha and Arnav were to be in proportion to their new profit sharing ratio. Surplus/deficit, if any, in their capital accounts was to be adjusted through current accounts.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

[2020]

 

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Sameer, Yasmin and Saloni were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. On 31st March, 2016, their balance sheet was as follows.

Balance Sheet

as on 31st March, 2016

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		1,10,000	Cash		80,000
General Reserve		60,000	Debtors	90,000
Capital A/cs			(-) Provision for Doubtful Debts	(10,000)	80,000
Sameer	3,00,000		Stock		1,00,000
Yasmin	2,50,000		Machinery		3,00,000
Saloni	1,50,000	7,00,000	Building		2,00,000
			Patents		60,000
			Profit and Loss A/c		50,000
		8,70,000 ========			8,70,000 ========

On the above date, Sameer retired and it was agreed that:

1. Debtors of Rs 4,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
2. An unrecorded creditor of Rs 20,000 will be recorded.
3. Patents will be completely written-off and 5% depreciation will be charged on stock, machinery and building.
4. Yasmin and Saloni will share the future profits m the ratio of 3 : 2.
5. Goodwill of the firm on Sameer’s retirement was valued at Rs 5,40,000.

Pass necessary journal entries for the above transactions in the books of the firm on Sameer’s retirement.