Question

Anil, Sunil and Mohit were partners sharing profits and losses in the proportion of their capital Their Balance Sheet as on 31st March, 2019 was as follows:

Balance Sheet as on 31st March, 2019
Liabilities	Amount (₹)	Assets		Amount (₹)
Capital Accounts:		Land and Building		80,000
Anil	60,000	Motor Lorry		40,000
Sunil	40,000	Debtors	32,000	28,000
Mohit	20,000	Less: R.D.D.	(4,000)
Creditors	50,000	Furniture		36,000
Outstanding Salary	6,000	Bank		28,000
Reserve fund	36,000
	2,12,000			2,12,000

Mohit died on 1st August. 2019 and the following adjustments were made:

(1) Assets to be revalued as under:

Land and Building	₹ 88,000
Motor Lorry	₹ 36,000
Furniture	₹ 34,000

(2) All debtors were good.

(3) Goodwill of the firm valued at two times the average profit of lost 4 years' profit.

(4) Mohit's share of profit is to be calculated on the basis of average profit of the last three years.

(5) Profit for four years 1st year ₹ 12,000, 2nd year ₹ 24,000, 3rd year ₹ 14,000, 4th year ₹ 22,000.

Prepare:

1. Mohit's capital account showing amount payable to his executor.
2. Give working note of Mohit's share of goodwill and profit up to the date of his death.

Answer 1

(a)

Dr.	Mohit's Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Mohit's Executor's Loan A/c	34,111	By Balance b/d	20,000
		By Reserve Fund A/c	6,000
		By Goodwill A/c	6,000
		By P/L Adjustment A/c	1,000
		By P/L Suspense A/c	1,111
	34,111		34,111

Working Note:

(b) Calculation of Mohit's Share of Goodwill:

(i) Average Profit = `(12,000 + 24,000 + 14,000 + 22,000)/4`

`= 72,000/4`

= ₹ 18,000

(ii) Goodwill of firm = Average Profit × 2 years Purchase

= 18,000 × 2 =  ₹ 36,000

(iii) Mohit's share of Goodwilll = Goodwill of Firm × Mohit's Share

`= 36,000 xx 1/6`

= ₹ 6,000

(iv) Calculation of Moh it's share of profit up to the date of death

(v) Average Profit = `(24,000 + 14,000 + 22,000)/3`

`= (60,000)/3`

= ₹ 20,000

(vi) Profit of the Firm = Average Profit × Period

`= 20,000 xx 4/12`

= ₹ 6,667

(vii) Mohit Share of Profit = Profit of the Firm × Mohit's Share

`= 6,667 xx 1/6`

= ₹ 1,111

(viii) Calculation of Mahit's share

`= (20,000)/(60,000 + 40,000 + 20,000)`

`= 20000/120000`

`= 1/6"th"`