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Question
L, M and N were partners in firm sharing profits in the ratio of 2:1:1. On 15' April 2013 their Balance Sheet as follows:
| Balance Sheet of L, M and N as on 1st April 2013 |
|||
| Liabilities | Rs | Assets | Rs |
|
Capital: L 6,00,000 M 4,80,000 N 4,80,000 General Reserve Workman’s Compensation Fund Creditors
|
15,60,000 4,40,000 3,60,000 2,40,000
|
Land Building Furniture Debtors 4,00,000 Less: Provision 20,000 Stock Cash
|
8,00,000 6,00,000 2,40,000
3,80,000 4,40,000 1,40,000
|
| 26,00,000 | 26,00,000 | ||
On the above date, N retired
The following were agreed:
i. Goodwill of the firm was valued at Rs 6,00,000.
ii. The land was to be appreciated by 40% and Building was to be depreciated by Rs 1,00,000. Furniture was to be depreciated by Rs 30,000.
iii. The liabilities for Workmen's Compensation Fund was determined at Rs 1,60,000.
iv. The amount payable to N was transferred to his loan account.
v. Capitals of L and M were to be adjusted in their new profit sharing ratio and for this purpose current accounts of the partners will be opened.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.
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Solution
| Revaluation Account | |||
| Particulars | Rs | Particulars | Rs |
|
To Building A/c To Furniture A/c To Revaluation Profit L’s Capital A/c 95,000 M’s Capital A/c 47,500 N’s Capital A/c 47,500 |
1,00,000 30,000
1,90,000 |
By Land A/c
|
3,20,000
|
| 3,20,000 | 3,20,000 | ||
| Partners’ Capital Account | |||||||
| Particulars | L | M | N | Particulars | L | M | N |
| To N’s Capital A/c | 1,00,000 | 50,000 | Balance b/d | 6,00,000 | 4,80,000 | 4,80,000 | |
| To M Current A/c | 1,20,000 | By General Reserve A/c | 2,20,000 | 1,10,000 | 1,10,000 | ||
| To M Current A/c | 1,20,000 | By Revaluation Profit A/c |
95,000 | 47,500 | 47,500 | ||
| To N’s Loan A/c | 8,37,500 | By Workmen Compensation fund |
1,00,000 | 50,000 | 50,000 | ||
| By L’s Capital A/c | 1,00,000 | ||||||
| To Balance c/d | 10,35,000 | 5,17,500 | By M’s Capital A/c | 50,000 | |||
| By L’s Current A/c | 1,20,00 | ||||||
| 11,35,000 | 6,40,000 | 8,37,500 | 11,35,000 | 6,40,000 | 6,40,000 | ||
| Balance Sheet As on April 01, 2012 after N’s retirement |
|||
| Liabilities | Rs | Assets | Rs |
|
L’s Capital M’s Capital Workmen Compensation Liability Creditors N’s Loan L’s Current
|
10,35,000 5,17,500 1,60,000 2,40,000 8,37,500 1,20,000
|
Land Building Furniture Stock Cash Debtors 4,00,000 Less: Provision 20,000 M’s Current
|
11,20,000 5,00,000 2,10,000 2,10,000 1,40,000
3,80,000 1,20,000
|
| 29,10,000 | 29,10,000 | ||
Working Notes:
Total Capital of L =10,15,000 – 1,00,000 = Rs 9,15,000
Total Capital of M = 6,87,500 – 50,000 = Rs 6,37,500
Total Capital of new firm = 9,15,000 + 6,37,500 = Rs 15,52,500
The new Capital has to be in the new profit sharing ratio = 2:1
Therefore, L's new capital = `1552500 xx 2/3 = 1035000`
Mr's new Capital = `1552000 xx 1/3 = 517500`
