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Question
Kavita, Ravita and Sunita were partners in a firm sharing profits in 2:1:2 ratio. On 31.3.2014 their Balance Sheet was as follows :
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors Bills Payable Capitals Kavita 1,40,000 Ravita 1,80,000 Sunita 90,000 |
83,000 19,000
4,10,000 |
Cash Debtors Bills payable Furniture Machinery Agarwal’s Capital |
45,000 34,000 15,000 2,10,000 2,00,000 8,000 |
| 5,12,000 | 5,12,000 |
On 31.9.2014, Sunita died. The partnership deed provided for the following to the executors of the deceased partner:
(a) Her share in the goodwill of the firm, calculated on the basis of three years' purchase of the average profits of the last four years. The profits of the last four years were Rs 1,98,000; Rs 2,24,000: Rs 2,76,000 and Rs 3,27,000 respectively.
(b) Her share in the profit of the firm till the date of her death, calculated on the basis of the average profits of the last four years.
(c) Interest @ 6% per annum on the credit balance, if any, in her Capital account.
(d) Interest on her loan @ 12% per annum.
Prepare Sunita's Capital Account to be presented to her executors
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Solution
| Sunita’s Capital Account | |||
| Dr. | Cr. | ||
| Particulars | Rs | Particulars | Rs |
| To Sunita’s Loan A/c | 8,000 | By Balance c/d | 90,000 |
| To Interest on Loan A/c | 480 | By Interest on Capital | 2,700 |
| To Sunita’s Executor A/ | 4,42,970 | By Profit and Loss Suspense A/c | 51,250 |
| By Kavita’s Capital A/c | 2,05,000 | ||
| By Ravita’s Capital A/c | 1,02,500 | ||
| 4,51,450 | 4,51,450 | ||
Working Notes:
WN 1 Calculation of Interest on Sunita’s Loan
Interest on Loan = `90000 xx 6/100 xx 6/12 = 2700`
WN2 Calculation of Interest on Sunita’s Loan
Interest on Loan = `8000 xx 12/100 xx 6/12 = 480`
WN 3 Calculation of Sunita’s Share in Profits
Average Profit = `"1,98,000 + 2,24,000 + 2,76,000 + 3,27,000"/4 = 256250`
Share of Sunita in profits = `256250 xx 2/5 xx 6/12 = 480`
WN3 Adjustment of Goodwill
Average Profit = 2, 56,250
Goodwill of the firm = Average Profit x Number of year’s purchase
= 2, 56,250 x 3 = 7,68,750
Sunita's Share of Goodwill = `768750 xx 2/5 = 307500`
Kavita will pay = `307500 xx 2/3 = 20500`
Ravita will pay = `307500 xx 1/3 = 102500`
