L, M and N were partners in a firm sharing profit in the ratio of 3:2:1. Their Balance Sheet on 31.3.2015 was as follows :
Balance Sheet of L,M and N as on 31-3-2015
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors General Reserve Capitals L 1,20,000 M 80,000 N 40,000
|
1,68,000 42,000
2,40,000
|
Bank Debtors Stock Investments Furniture Machinery
|
34,000 46,000 2,20,000 60,000 20,000 70,000
|
| 4,50,000 | 4,50,000 |
On the above date O was admitted as a new partner and it was decided that:
(i) The new profit sharing ratio between L, M, N and 0 will be 2: 2: 1: 1.
(ii) Goodwill of the firm was valued at Rs.1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was Rs.36,000.
(iv) Machinery will be reduced to Rs.58,000.
(v) A creditor of Rs.6,000 was not likely to claim the amount and hence to be written-off.
(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account. Partner's Capital Accounts and the Balance Sheet of the New Firm
Solution
Revaluation Account
Dr. Cr.
| Particulars | Amount(Rs.) | Particulars | Amount(Rs.) |
|
To Investment To Machinery
|
24,000 12,000
|
By Creditors
By Loss on Revaluation L’s Capital A/c 15,000 M’s Capital A/c 10,000 N’s Capital A/c 5,000
|
6,000
30,000
|
| 36,000 | 36,000 |
Partner’s Capital Account
Dr. Cr.
| Particulars | L(Rs.) | M(Rs.) | N(Rs.) | O(Rs.) | Particulars | L(Rs.) | M(Rs.) | N(Rs.) | O(Rs.) |
|
To Reval. A/c
To Balance c/d
|
15,000
1,56,000
|
10,000
84,000
|
5,000
42,000
|
56,400
|
By Balance c/d General Reserve Prem For G/w Cash A/c |
1,20,000 21,000 30,000
|
80,000 14,000
|
40,000 7,000
|
56,400 |
| 1,71,000 | 94,000 | 47,000 | 56,400 | 1,71,000 | 94,000 | 47,000 | 56,400 |
Balance Sheet
as on March 31,2015
| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
|
Creditors Capitals : L 1,56,000 M 84,000 N 42,000 O 56,400
|
1,62,000
3,38,400
|
Bank (34,000 + 56,400 + 30,000) Debtors Stock Investments Furniture Machinery
|
1,20,400 46,000 2,20,000 36,000 20,000 58,000
|
| 5,00400 | 5,00400 |
Working Notes :
WN1 : Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio - New Ratio
L's = (3/6) - (2/6) = 1/6
M's = (2/6) - (2/6) = Nil
N's = (1/6) - (1/6) = Nil
WN 2: Adjustment of Goodwill
O's Share of Goodwill = 1,80,000 x (1/6) = 30,000
30,000 will be credited to L's Capital A/c, as he is the only sacrificing partner
WN 3: Calculation of O’s Proportionate Capital
Adjusted Old Capital of L = 1, 20,000 + 21,000 + 30,000 – 15,000 = `1, 56,000
Adjusted Old Capital of M = 80,000 + 14,000 – 10,000 = `
Adjusted Old Capital of M = 80,000 + 14,000 – 10,000 = `
Adjusted Old Capital of M = 80,000 + 14,000 – 10,000 = `84,000
Adjusted Old Capital of N = 40,000 + 7,000 – 5,000 = `
Adjusted Old Capital of N = 40,000 + 7,000 – 5,000 = `42,000
Total Adjusted Capital = 1, 56,000 + 84,000 + 42,000 = `
Total Adjusted Capital = 1, 56,000 + 84,000 + 42,000 = `
Total Adjusted Capital = 1, 56,000 + 84,000 + 42,000 = `2, 82,000
O’s Proportionate Capital = Total Adjusted Capital x O’s Profit Share x Reciprocal of Combined New Share of Old Partners
`= 282000xx1/6xx6/5=56400`
