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J, H and K Were Partners in a Firm Sharing Profits in the Ratio of 5:3:2. on 31-3-2015 Their Balance Sheet Was as Follows - CBSE (Arts) Class 12 - Accountancy

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Question

J, H and K were partners in a firm sharing profits in the ratio of 5:3:2. On 31-3-2015 their Balance Sheet was as follows:

                                   Balance Sheet of J,H and K as on 31-3-2015

LIabilities Amount(Rs.) Assets Amount(Rs.)

Creditors

Investment Fluctuation Fund

P & L Account

Capital:

       J                            1,00,000

       H                             80,000

       K                             40,000 

 

42,000

20,000

80,000

 

 

 

2,20,000

 

Land and Building

Motor Vans

Investments

Machinery

Stock

Debtors                         80,000

      Less:                         6,000  

Cash

2,24,000

40,000

38,000

24,000

30,000

 

74,000

32,000

  3,62,000   3,62,000

On the above data H retires and J and K agreed to continue the business on the following terms:

(i) Goodwill of the firm was valued at Rs.1,02,000.

(ii) There was a claim of Rs.8,000 for workmen's compensation.

(iii) Provision for bad debts was to be reduced by Rs.2,000.

(iv) H will be paid Rs.14,000 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly installments together with interest @ 10% p.a.

(v) The new profit sharing ratio between J and K will be 3:2 and their capitals will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts.

Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new firm.

Solution

                                                                   Revaluation Account

Dr.                                                                                                                                                               Cr.

Particulars Amount(Rs.) Particulars Amount(Rs.)

To Claim for Workman Compensation

 

 

 

 

 

 

8,000

 

 

 

 

 

 

By Provision for Doubtful Debts

 

By Loss on Revaluation

      J’s Capital A/c                         3,000

      H’s Capital A/c                        1,800

      K’s Capital A/c                        1,200

 

2,000

 

 

 

 

6,000

 

  8,000   8,000

 

                                                                                                 Partner’s Capital Account

Dr.                                                                                                                                                                                                                Cr.

Particulars J (Rs.) H (Rs.) K (Rs.) Particulars J (Rs.) H (Rs.) K (Rs.)

Revaluation A/c

H’s Capital A/c

Cash A/c

H’s Loan A/c

 

Balance c/d

3,000

10,200

 

 

 

1,36,800

1,800

 

14,000

1,24,800

 

 

1,200

20,400

 

 

 

38,400

Balance b/d

IFF

P&L A/c

J’s Capital

K’s Capital

 

1,00,000

10,000

40,000

 

 

 

80,000

6,000

24,000

10,200

20,400

 

40,000

4,000

16,000

 

 

 

  1,50,000 1,40,600 60,000   1,50,000 1,40,600 60,000

Current A/c

 

Balance c/d

31,680

 

1,05,120

 

 

 

70,080

Balance b/d

Current A/c

 

1,36,800

 

 

 

38,400

31,680

 

  1,36,800   70,080   1,36,800   70,080

 

                                                                     Balance Sheet as on March 31,2015

Liabilities Amount (Rs.) Assets Amount (Rs.)

Creditors

Capitals

      J                                             1,05,120

      H                                             70,080     

J’s Current A/c

Claim for Workmen Compensation

H’s Loan A/c

 

 

 

42,000

 

 

1,75,200

31,680

8,000

1,24,800

 

 

 

Land and Building

Motor Vans

Investment

Machinery

Stock

Debtors                                              80,000 

     Less: Provision                               4,000   

Cash (32,000 - 14,000)

K’s Current A/c

 

1,24,000

40,000

38,000

24,000

30,000

 

76,000

18,000

31,680

 

  3,81,680   3,81,680

 

Working Notes :

WN 1: Calculation of Gaining Ratio

J's = (3/5) - (5/10) = 1/10

K's = (2/5) - (2/10) = 2/10

Gaining Ratio = 1 : 2

 

WN 2: Adjustment of Goodwill

H's Share of Goodwill = 1,02,000 x (3/10) = 30,600

30,600 will be debited to gaining partners (J and K) in the ratio of 1:2

J's Share = 30,600 x (1/3) = 10,200

K's share = 30,600 x (2/3) = 20,400

 

WN 3: Adjustment of Capital

Adjusted Capital of J = 1,00,000 + 10,000 + 40,000 – 3,000 – 10,200 = 1,36,800

Adjusted Capital of K = 40,000 + 4,000 + 16,000 – 1,200 – 20,400 = 38,400

Total Adjusted Capital = 1,36,800 + 38,400 = 1,75,200

J's New Capital = 87,600 x (3/5) = 52,560

K's New Capital = 87,600 x (2/5) = 35,040

K’s New Capital > K’s Adjusted Capital (K owes 31,680 to the firm)

J’s New Capital < J’s Adjusted Capital (Firm owes 31,680 to J)

 

WN 4 Amount transferred to H’s Loan A/c

Amount to be transferred = (Credit side – Debit side) – Cash paid

                                      = (1,40,600 – 1,800) – 14,000

                                      = 1,24,800

  Is there an error in this question or solution?
Solution J, H and K Were Partners in a Firm Sharing Profits in the Ratio of 5:3:2. on 31-3-2015 Their Balance Sheet Was as Follows Concept: Preparation of Revaluation Account and Balance Sheet.
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