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Question
Kapil, Mohit, Roshan and Rakesh were partners in firm sharing profits in the ratio of 5:2:2:1. On 1.4.2016 their Balance Sheet was as follows :
| Balance Sheet of Kapil, Mohit, Roshan and Rakesh as on 1.4.2016 |
|||
| Liabilities | Rs | Assets | Rs |
|
Capitals : Kapil 3,50,000 Mohit 3,00,000 Roshan 2,50,000 Rakesh 2,00,000 Sundry Creditors Workmen Compensation Reserve |
11,00,000 50,000 50,000 |
Fixed Assets Current Assets
|
8,00,000 4,00,000
|
| 12,00,000 | 12,00,000 | ||
From the above date, the partners decided to share the future profits equally. For this purpose, the goodwill of the firm was valued at Rs 72,000. It was also agreed that:
1) Fixed assets will be depreciated by 10% and the claim against Workmen Compensation Reserve will be estimated at Rs 70,000.
2) The Capitals of the partners will be adjusted according to their new profit sharing ratio. For this, Partners' Current Accounts will be opened
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.
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Solution
| Revaluation Account | |||
| Dr. | Cr. | ||
| Particulars | Rs | Particulars | Rs |
|
To Provision for WCF A/c To Depreciation on Fixed Assets
|
20,000 80,000
|
By Revaluation Loss: Kapil Capital A/c 50,000 Mohit Capital A/c 20,000 Roshan Capital A/c 20,000 Rakesh Capital A/c 10,000 |
1,00,000 |
| 1,00,000 | 1,00,000 | ||
| Partner’s Capital Account | |||||||||
| Dr. | Cr. | ||||||||
| Particulars | Kapil | Mohit | Roshan | Rakesh | Particulars | Kapil | Mohit | Roshan | Rakesh |
|
To Revaluation A/c (Loss) To Kapil Capital A/c
To Current A/c To Balance c/d |
50,000
68,000 2,50,000 |
20,000 3,600
26,400 2,50,000 |
20,000 3,600
2,50,000 |
10,000 10,800
2,50,000 |
By Balance b/d By Mohit’s Capital A/c By Roshan Capital A/c By Rakesh Capital A/c By Current A/c
|
3,50,000 3,600 3,600 10,800
|
3,00,000
|
2,50,000
23,600
|
2,00,000
70,800
|
| 3,68,000 | 3,00,000 | 2,73,600 | 2,70,800 | 3,68,000 | 3,00,000 | 2,73,600 | 2,70,800 | ||
| Balance Sheet | |||
| Liabilities | Rs | Assets | Rs |
|
Capital Kapil 2,50,000 Mohit 2,50,000 Roshan 2,50,000 Rakesh 2,50,000
Current A/c Kapil 68,000 Mohit 26,400 Sundry Creditors Claim against WCF |
10,00,00
94,400 50,000 70,000 |
Fixed Assets 8,00,000 Less: Depreciation (80,000)
Current A/c Roshan 23,600 Rakesh 70,800
Current Assets
|
7,20,000
94,400
4,00,000
|
|
12,14,400 |
|
12,14,400 |
|
WN 1: Calculation of Gaining Ratio/ Sacrificing Ratio:
Old Rato 5:2:2:1
New Ratio 1:1:1:1
Kapil = `5/10 - 1/4 = 10/40` Sacrificing
Mohit = `2/10 - 1/4 = 2/40` Gaining
Roshan = `2/10 - 1/4 = -2/40` Gaining
Rakesh = `1/10 - 1/4 = -6/40` Gaining
Mohit , Roshan and Rakesh will compensate kapil
Journal Entry for Goodwill
| Journal | ||||
| Date | Particulars | L.F. |
Dr. Rs |
Cr. Rs |
|
Mohit’s Capital A/c Dr. Roshan’s Capital A/c Dr. Rakesh’s Capital A/c Dr. To Kapil’s Capital A/c (Being Mohit, Roshan and Rakesh will compensate to Kapil in their gaining ratio) |
3,600 3,600 10,800
|
18,000
|
||
WN 2: Calculation of Adjusted Capital
Kapil= 3,68,000 −50,000= 3,18,000
Mohit= 3,00,000 −23,600= 2,76,400
Roshan= 2,50,000 – 23,600= 2,26,400
Rakesh= 2,00,000 −20,800= 1,79,200
Total Combined Capital= 10,00,000
WN 3: Calculation of New Capital
Kapil = `10,00,000 xx 1/4 = 250000`
Mohit = `10,00,000 xx 1/4 = 250000`
Roshan = `10,00,000 xx 1/4 = 250000`
Rakesh = `10,00,000 xx 1/4 = 250000`
