Gaurav, Saurabh, and Vaibhav were partners in firm sharing profits and losses in the ratio of 2: 2: 1. They decided to dissolve the firm on 31st March 2018. After transferring Sundry assets (other than cash in hand and cash at Bank) and third-party liabilities to realisation account, the assets were realized and liabilities were paid off as follows:
(i) A machinery with a book value of ₹ 6,00,000 was taken over by Gaurav at 50% and stock worth ₹ 5,000 was taken over by a creditor of ₹ 9,000 in full settlement of his claim.
(ii) Land and building (book value ₹ 3,00,000) were sold for ₹ 4,00,000 through a broker who charged 2% commission.
(iii) The remaining creditors were paid ₹ 76,000 in full settlement of their claim and the remaining assets were taken over by Vaibhav for ₹ 17,000.
(iv) Bank loan of ₹ 3,00,000 was paid along with interest of ₹ 21,000.
Pass necessary journal entries for the above transactions in the books of the firm.
Books of …
|(i)||Gaurav’s Capital A/c||Dr.||3,00,000|
|To Realisation A/c||3,00,000|
|(Being machinery taken over at 50% rate)|
|Note: There will be no journal entry for mutual exchange between the firm and creditors against stock|
|To Realisation A/c||4,00,000|
|(Being Land & Building sold )|
|To Bank A/c||8,000|
|(Being brokerage commission paid on sale of Land and Building @ 2% of sale consideration)|
|To Bank A/c||76,000|
|(Being remaining creditors were paid off in full settlement)|
|Vaibhav’s Capital A/c||Dr.||17,000|
|To Realisation A/c||17,000|
|(Being remaining assets were taken over by Vaibhav)|
|To Bank A/c (3,00,000 + 21,000)||3,21,000|
|(Being bank loan paid along with interest thereupon)|