Question

A, B and C are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Their books are closed on March 31st every year. B died on September 30th, 2023 and A and C decided to share future profits in 3 : 2. The executors of B are entitled to: His share of Capital i.e., ₹ 25,00,000 along-with his share of goodwill. The total goodwill of the firm was valued at ₹ 1,20,000. His share of profit up to his date of death on the basis of sales till date of death. Sales for the year ended March 31, 2023 was ₹ 3,00,000, and profit for the same year was 10% on sales. Sales show a growth trend of 20% and percentage of profit earning is reduced by 1%.

You are required to give answer to the following question:

In respect of B’s share of profit:

Options

• Profit and Loss Suspense Account will be debited by ₹ 5,400

• Profit and Loss Suspense Account will be debited by ₹ 16,200.

• A and C will be debited by ₹ 4,050 and ₹ 1,350 respectively.

• A and C will be debited by ₹ 1,620 and ₹ 3,780 respectively.

Answer 1

A and C will be debited by ₹ 1,620 and ₹ 3,780 respectively.

Explanation:

Sales = 3,00 000 + 20% of 3,00,000

= 3,00,000 + 60,000

= ₹ 3,60 000

Profit% = 10% - 1% = 9%

Profit for six months = `3,60,000xx9/100xx6/12`

= ₹ 16,200

B's Share of Profit = `16,200xx2/6`

= ₹ 5,400

It will be debited to A and C in 3 : 7

A's share = `5,400xx3/10` = ₹ 1,620

B's share = `5,400xx7/10` = ₹ 3,780