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Question
Annie and Bonnie are partners in a firm, sharing profits and losses equally. Their Balance Sheet as at 31st March,
2017, was as follows:
Balance Sheet of Annie and Bonnie
As at 31st March, 2017
| Liabilities | Amount Rs. | Assets | AmountRs. |
| Sundry Creditors | 21,000 | Cash at Bank | 20,000 |
| General Reserve | 15,000 |
Sundry Debtors 22,000 Less Provision for Doubtful Debts (1,000) |
21,000 |
|
Capital A/c Annie 45,000 Bonnie40,000 |
85,000 |
Stock | 10,000 |
| Plant & Machinery | 60,000 | ||
| Goodwill | 10,000 | ||
| 1,21,000 | 1,21,000 |
Carl was to be taken as a partner for 1/4 share in the profits of the firm, with effect from 1st April, 2017, on the
following terms:
(a) Bad debts amounting to Rs. 1,500 to be written off.
(b) Stock to be taken over by Annie at Rs.12,000.
(c) Plant and Machinery to be valued at Rs. 50,000.
(d) Goodwill of the firm to be valued at Rs. 20,000.
(e) Carl to bring in Rs. 50,000 as his capital. He was unable to bring his share of goodwill in cash.
(f) General Reserve not to be distributed. For this, it was decided that Carl would compensate the old partners
through his current account.
You are required to:
(i) Pass journal entries on the date of Carl's admission.
(ii) Prepare the Balance Sheet of the reconstituted firm
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Solution
Journal
| Date | Particulars | L.F. | Amount Rs. | Amount Rs. |
|
Bank A/c .... Dr To Carl’s Capital A/c (Being cash brought in by Carl for Capital) |
50,000
|
50,000 | ||
|
Carl’s Current A/c ..... Dr To Annie’s Capital A/c To Bonnie’s Capital A/c 2,500 (Being old partners compensated for GW in the sacrificing ratio) |
5,000
|
2,500
2,500 |
||
|
Prov. for Doubtful Debts A/c .... Dr Revaluation A/c .... Dr To Debtors A/c (Being bad debts written off) |
1,000 500
|
1,500 |
||
|
Revaluation A/c ....Dr To Plant and Machinery A/c (Being loss on plant and machinery) |
10,000
|
10,000 | ||
|
Stock A/c ...Dr To Revaluation A/c (Being stock revalued) |
2,000
|
2,000 | ||
|
Annie’s Capital A/c Dr Bonni’s Capital A/c Dr To Revaluation A/c (Being loss on revaluation written off in OR) |
4,250 4,250
|
8,500 | ||
|
Annie’s Capital A/c.. Dr To Stock A/c 12 (Being stock taken over by Annie) |
12,000
|
12,000
|
||
|
Annie’s Capital A/c ..Dr Bonnie’s Capital A/c Dr To Goodwill A/c (Being Goodwill written off in OR) |
5,000 5,000
|
10,000 | ||
|
Carl’s Current A/c... Dr To Annie’s Capital A/c To Bonnie’s Capital A/c (Being old partners compensated for G Reserve in the SR) |
3,750
|
1,875 1,875
|
Working Notes :
Partners’ Capital Accounts
| Particular | Annie | Bonnie | Carl | Particular | Annie | Bonnie | Carl |
| To Revaluation A/C | 4,250 | 4,250 | By Balance b/d | 45,000 | 40,000 | ||
| To Goodwill A/c | 5,000 | 5,000 | By Bank A/c | 50,000 | |||
| To Stock A/c | 12,000 | By Carl’s Current A/c | 2,500 | 2,500 | |||
| To bal. c/d | 28,125 | 35,125 | 50,000 | By Carl’s Current A/c | 1,875 | 1,875 | |
| 49,375 | 44,375 | 50,000 | 49,375 | 44,375 | 50,000 |
Balance Sheet of Annie and Bonnie and Carl As at 1st April, 2017
| Liabilities | Amount | Assets | Amount |
| Sundry Creditors | 21,000 | Cash at Ban | 70,000 |
| General Reserve | 15,000 | Sundry Debto22,000 | |
| Capital A/c | Less bad Debts (1,500) | 20,500 | |
| Annie 28,125 | Plant & Machinery | 50,000 | |
| Bonnie35,125 | Carl’s Current A/c | 8,750 | |
| Carl 50,000 | 1,13,250 | ||
| 1,49,250 | 1,49,250 |
