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Reconstitution Of A Partnership Firm: Retirement Of A Partner - Important Questions Model Paper In 12th Accountancy

Published on: 30/07/2018

Based on the chapter Reconstitution of a Partnership Firm: Retirement of a Partner, some of the important questions are prepared in this question paper from the book back and PTA question.
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Questions:

Generic 3

3 x 3 = 9

The balance sheet of Block, white and red sharing profits and losses in the ratio 5:3:2 on 31st December 2014 is given below
Balance Sheet
as at 31st December 2014

Liabilities		Amt(Rs)	Assets		Amt(Rs)
Sundry Creditors		24,000	Goodwill		20,000
Employees Provident Fund		12,000	Patents		1,04,000
Investment Fluctuation Reserve		14,000	Machinery		1,24,800
Workmen Compensation Reserve		14,000	Investments		12,000
Capital A/cs			Stiock		40,000
Black	2,70,000		Sundry Debtors	48,000
White	1,90,000		(-)Provision for Doubtful Debts	(8,000)	40,000
Red	1,48,000	6,080,000	Loan to Red		2,000
			Cash at Bank		25,200
			Advertisement Expenditure A/c		4,000
			Profit and Loss A/c(2014)		3,00,000
		6,72,000			6,72,000

Red retire from 1st May 2015 and Black and White decide to share future profits and losses in the ratio of 3:5.Red has withdrawn Rs.20.000 during 2015.It was agreed that
(i) Goodwill be valued at 2 1/2 years' purchase of average of four completed years' profits which were:2011 Rs.4,04,000; 2012 Rs.56,000; 2013 Rs.64,000
(ii) Red's share of profits from the closure of last accounting year till date of retirement be calculated on the basis of the average of three completed years' profits before retirement.
(iii) Patents undervalued by Rs.28000, machinery overvalued by Rs.27,200, all debtors are good.Rs.2,000 provided in sundry creditors is not likely to arise.Unaccounted accrued income of Rs.4,400 to be provided for.A debtor whose dues of Rs.800 were written-off as bad debts, paid 50% in full settlement.A Claim of Rs.2,000 on account of workmen's compensation to be provided for.
(iv) Investments be sold for Rs.16,400.Red was to be paid through cash brought in by Black and White in such a way as to make their capitals proportionate to their new profit sharing ratio of 3:5 assuming that a minimum cash and bank balance of Rs.18,000 was to be maintained.
Prepare revaluation account, capital accounts of partners and the balance sheet of new firm.

Identify the value being reflected by continuing partners in giving outgoing partner his share of Goodwill.

A,B,C and D are partners sharing profits in the ratio of 3:3:2:2 respectively. D retires and A,B and C decide to share the future profits in the ratio of 3:2:1. Goodwill of the firm is valued at Rs.6,00,000. Goodwill already appears in the books at Rs.4,50,000. The profits for the first year after D's retirement amount to Rs.12,00,000. Give the necessary Jounal entires to record Goodwill and to distribute the profits. Show your calculations clearly.

Generic 6

1 x 6 = 6

Sandeep, Praveen and Tara are partners sharing profits in the ratio of 3:2:1. On 1st April, 2012 Sandeep gave a notice to retire from the firm. Praveen and Tara after all adjustments showed a balance of Rs.64,000 and Rs.1,00,000 respectively. The total amount to be paid to Sandeep was Rs.1,23,000. This amount was to be paid by Praveen and Tara in such a way Pass necessary Journal entires for the above transations in the books of the firm. Show your working clearly.

1 Marks

3 x 1 = 3

Kumar,Verma and Naresh were partners in a firm sharing profit and loss in the ratio of 3:2:2. On 23rd January, 2015, Verma died. Verma's share of profit till the date of his death was calculated Rs.2,350.

Pass necessary journal entry for the same in the books of the firm.

Why does a firm revaluate its assets and reassess its liabilities on retirement or death of a partner ?

State any two deductions that may have to be made from the amount payable to the legal representative of a deceased partner.

Generic 8

2 x 8 = 16

P, Q and R were partners in a firm sharing profits in the ratio of 5:3:2.n 31st March, 2015, their balance sheet was as under

Balance Sheet
as at 31st March, 2015

Liabilities		Amt(Rs)	Assets	Amt(Rs)
Sundry Creditors		70,000	Furniture	2,00,000
General Reserve		1,00,000	Investment	3,00,000
Capital A/cs			Stock	1,00,000
P	3,00,000		Patents	60,000
Q	2,50,000		Cashat Bank	2,10,000
R	1,50,000	7,00,000
		8,70,00		8,70,000

R died on 1st October, 2015.t was agreed between his executors and the remaining partners that
(i) Good will be valued at 2years' purchase of the average profits of the previous five years, which were: 2011=Rs.50,000, 2012=Rs.1,30,000, 2013=Rs.1,20,000, 2014=Rs.1,50,000 and 2015=Rs.2,00,000.
(ii)Patents be valued at Rs.80,000, investment at 2,80,000, furniture at Rs.3,00,000.
(iii)Profit for the year 2015-16 be taken as having accrued at the same rate as the previous year.
(iv)Interest on capital be provided at 10% per annum.
(v)A sum of Rs.77,500 was paid to his executors immediately.
Prepare R's capital account and his executor's account at the time of his death.

Riya, Shreya and Niya are partners sharing profits in the ratio of 1:2:3. Niya retires and her capital, after making adjustments for reserves and profits on revaluation stands at Rs.4,40,000.Riya and Shreya agreed pay her Rs.5,00,000 in full settlement of her claim.Record necessary journal entry for the treatment of good will, if the new profit sharing ratio is decided at 1:3

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Answers Key:

Generic 3

3 x 3 = 9

Profit on revaluation=Rs.20,000; Capital account balances: Black=Rs.1,12,500, white=Rs.1,87,500; Balance sheet total=Rs.3,40,000; Goodwill=Rs.1,40,000: Share of Goodwill=Rs.28,000; Share of loss=Rs.4,000; Black sacrifices 5/40; White gains 13/40

Recognition Continuing partners have recognised the efforts of the outgoing partner in bringing the firm to its present profitable position.

A's gain 6/30, B's gain 1/30, C's sacrifice 1/30.
(i) Dr.A's Capital Rs.1,35,000 and B's Capital Rs.1,35,000; Cr.C's capital Rs.90,000; Cr.Goodwill Rs.4,50,000.
(ii) Dr.A's Capital Rs.1,20,000 and B's Capital Rs.20,000; Cr.C's Capital Rs.20,000 and D's Capital Rs.1,20,000.
(iii) Dr.Profit and Loss Appropriation A/c Rs.12,00,000; Cr.A's Capital Rs.6,00,000, B's Capital Rs.4,00,000 and C's Capital Rs.2,00,000.

Generic 6

1 x 6 = 6

(i) Total capital of New Firm of Praveen and Tara Rs.2,87,000 (i.e., Rs.1,23,000+Rs.64,000+Rs.1,00,000) will be divided in the new ratio 2:3, i.e., 1,14,800 and Rs.1,72,200 respectively.

(ii) (a) Dr. Bank A/c Rs.1,23,000; Cr. Parveen's Capital A/c Rs.50,800, i.e., Rs.1,14,800-Rs.64,000 and Tara's Capital A/c Rs.72,200 i.e., Rs.1,72,200-Rs.1,00,000 (b) Dr. Sandeep's Capital A/c, Cr. Bank A/c by Rs.1,23,000.

[Hint: Gaining Ratio 3:2.]

1 Marks

3 x 1 = 3

()
Dr. Profit and Loss suspense A/c, Cr. Verma's capital A/c by RS.2,350.

()
Assets and liabilities are revalued at the time of retirement/death of a partner so that the retiring/deceased partner is not at an advantage/disadvantage because of change in the value of assets and liabilities.

()
(i) Share of accumulated losses
(ii) Drawings upto death etc.

Generic 8

2 x 8 = 16

R's executors's account=Rs.2,57,500

Journal

Particulars		Amt(Dr)	Amt(Cr)
Riya's Capital A/C (60,000 x 1/6)	Dr	10,000
Shreya's Capital A/C (60,000 x 5/6)	Dr	50,000
To Niya's Capital A/C			60,000
(Being Niya's share of goodwill adjusted to the capital accounts of Riya and Shreya in their gaining ratio of 1:5)

Working Note
1. Calculation of Gaining Ratio
Gaining ratio = New share - Old share
\(\text { Riya }=\frac{1}{4}-\frac{1}{6}=\frac{3-2}{12}=\frac{1}{12} ; \quad \text { Shreya }=\frac{3}{4}-\frac{2}{6}=\frac{9-4}{12}=\frac{5}{12} ; \quad \text { Gaining ratio }=\frac{1}{12}: \frac{5}{12} \text { or } 1: 5\)