- A and B were partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into the partnership with 1/6 share in the profits. Calculate the new profit sharing ratio?
Solution-
Old profit sharing ratio of A and B = 3:2
C admitted for 1/6th share
Remaining share would be shared by A and B their profit sharing ratio i.e. 3:2
A’s new share = 5/6 x 3/5
= 15/30
B’s new share = 5/6 x 2/5
= 10/30
New profit sharing ratio of A, B and C
= 15/30 : 10/30 : 1/6 x 5/5
= 15/30 : 10/30 : 5/30
= 3:2:1
2. A, B, C were partners in a firm sharing profits in 3:2:1 ratio. They admitted D for 10% profits. Calculate the new profit sharing ratio?
Solution-
Old profit sharing ratio of A, B and C = 3:2:1
D admitted for 10% profits = 10/100
= 1/10
Remaining share = 1- 1/10
= 9/10
Remaining share would be shared by A, B and C in their sharing ratio i.e. 3:2:1
A’ new share = 9/10 x 3/6
= 27/60
B’ new share = 9/10 x 2/6
= 18/60
C’ new share = 9/10 x 1/6
= 9/60
New profit sharing ratio of A, B, C and D after making base equal
= 27/60 : 18/60 : 9/60 : 1/10 x 6/6
= 27/60 : 18/60 : 9/10 : 6/60
= 9 : 6 : 3 : 2
3. X and Y are partners sharing profits in 5:3 ratio admitted Z for 1/10 share which he acquired equally from A. Calculate new profit sharing ratio?
Solution-
Old profit sharing ratio of X and Y = 5 : 3
Z admitted for 1/10th share which he acquired equally from X and Y
Z acquired from X = 1/10 x 1/2
= 1/20
Z acquired from Y = 1/10 x ½
= 1/20
X’s new share = 5/8 – 1/20
= 25 – 2/40
= 23 / 40
Y’s new share = 3/8 – 1/20
= 15 – 2 / 40
= 13/40
New profit sharing ratio of X, Y and Z after making base equal
= 23/40 : 13/40 : 1/10 x 4/4
= 23 : 13 : 4
4. A, B and C are partners sharing profits in 2:2:1 ratio admitted D for 1/8 share which he acquired entirely form A. Calculate new profit sharing ratio?
Solution –
Old profit sharing ratio of A, B and C = 2:2:1
D admitted for 1/8th share which he acquired entirely form A
A’ new share = 2/5 – 1/8
= 16 – 5 / 40
= 11/40
B’ new share = 2/5 – 0/1
= 2 – 0/5
= 2/5
C’ new share = 1/5 – 0/1
= 1 – 0 / 5
= 1/5
New profit sharing ratio of A, B, C and D after making base equal
= 11/40 : 2/5 x 8/8 : 1/5 x 8/8 : 1/8 x 5/5
= 11 /40 : 16/40 : 8/40 :5/40
= 11 : 16 : 8 : 5
5. P and Q are partners sharing profits in 2:1 ratio. They admitted R into partnership giving him 1/5 share which he acquired from P and Q in 1:2 ratio. Calculate new profit sharing ratio?
Solution –
Old profit sharing ratio of P and Q is = 2:1
R admitted for 1/5th share which he acquired from P and Q = 1:2
P sacrificed to R = 1/5 x 1/3
= 1/15
Q sacrificed to R = 1/5 x 2/3
= 2/15
P’s new share = 2/3 – 1/15
= 20 – 2 /30
= 18/30
Q’s new share = 1/3 – 2 /15
= 10 – 4 /30
= 6/30
New profit sharing ratio of P, Q and R after making base equal
= 18 / 30 : 6 / 30 : 1/5 x 6/6
= 18 / 30 : 6 / 30 : 6 / 30
= 3: 1: 1
6. A, B and C are partners sharing profits in 3:2:2 ratio. They admitted D as a new partner for 1/5 share which he acquired form A, B and C in 2:2:1 ratio respectively. Calculate new profit sharing ratio?
Solution –
Old profit sharing ratio of A, B and C is 3 : 2 : 2
D is admitted for 1/5 share which he acquired from A, B and C in 2:2:1
A Sacrifices = 1/5 x 2/5
= 2/ 25
B sacrifices = 1/5 x 2/5
= 2/25
C Sacrifices = 1/ 5 x 1/5
= 1/25
A’s new share = 3/7 – 2/25
= 75 – 14 / 7 x 25
= 61 / 7 x 25
B’s new share = 2/7 – 2/25
= 50 – 14 / 7 x 25
= 36 / 7 x 25
C’s new share = 2/7 – 1/25
= 50 – 7 / 7 x 25
= 43 / 7 x 25
New profit sharing ratio of A, B, C and D is
= 61 / 7 x 25 : 36 / 7 x 25 : 43 / 7 x 25 : 1/5 x 35 /7×5
= 61 : 36 : 43 : 35
7. A and B were partners in a firm sharing profits in 3:2 ratio. They admitted C for 3/7 share which he took 2/7 from A and 1/7 from B. Calculate new profit sharing ratio?
Solution –
Old Profit sharing Ratio of A and B in 3:2
C admitted for 3/7th share which he took 2/7 from A and 1/7 from B.
A’s new share = 3/5 – 2/7
= 21 – 10 / 35
= 11 / 35
B’s new share = 2/5 – 1/7
= 14 – 5 /35
= 9 / 35
New profit sharing ratio of A, B and C is
= 11/35 : 9/35 : 3/7 x 5/5
= 11 : 9 : 15
8. A, B and C were partners in a firm sharing profits in 3:3:2 ratio. They admitted D as a new partner for 4/7 profit. D acquired his share 2/7 from A. 1/7 from B and 1/7 from C. Calculate new profit sharing ratio?
Solution –
Old profit sharing ratio of A, B and C is 3:2:2
D admitted for 4/7the share which he acquired from A 2/7, B 1/7 and C 1/7
A’s new share = 3/8 – 2/7
= 21 – 16 / 56
= 5 / 56
B’s new share = 3/8 – 1/7
= 21 – 8 / 56
= 13 / 56
C’s new share = 2/8 – 1/7
= 14 – 8 / 56
= 6 / 56
New profit sharing ratio of A, B, C and D after making base equal
= 5 / 56 : 13 / 56 : 6 / 56 : 4/7x 8/8
= 5 : 13 : 6 : 32
9. Radha and Rukmani are partners in a firm sharing profits in 3:2 ratio. They admitted Gopi as a new partner. Radha surrendered 1/3 of her share in favoure of Gopi and Rukmani surrendered ¼ of her share in favour of Gopi. Calculate new profit sharing ratio?
Solution –
Old profit sharing Ratio of Radha and Rukmani = 3:2
Gopi admitted at a new partner
Radha Surrendered = 3 /5 x 1/3
= 3 / 15
Rukmani Surrendered = 2 / 5 x ¼
= 2 /20
Radha’s new share = 3 /5 – 3 / 15
= 9 – 3 / 15
= 6 / 15
Rukmani new share = 2 / 5 – 2 /20
= 8 – 2 / 20
= 6 / 20
New profit sharing ratio of Radha, Rukmani and Gopi is
Gopi share = 3 / 15 + 2 /20
= 12 +6 / 60
= 18 / 60
= 6 / 15 x 4 / 4 : 6 / 20 x 3/3 : 18 / 60
= 24 : 18 : 18
= 4 : 3 : 3
10. Singh, Gupta and Khan are partners in a firm sharing profits in 3:2:3 ratio. They admitted Jain as a new partner. Singh surrendered 1/3 of his share in favoure of Jain: Gupta surrendered 1/4 of his share in favoure of Jain and Khan surrendered 1/5 in favoure of Jain. Calculate new profit sharing ratio?
Solution –
Old profit sharing ratio of singh Gupta & Khan in 3:2:3 ratio
Jain admitted as a new Partners
Singh Surrendered = 3/ 8 x 1/3
= 3 /24
Gupta Surrendered = 2 / 8 x 1/ 4
= 2 / 32
Khan Surrendered = 3 / 8 x 1 /5
= 3 / 40
Singh’s new share = 3 / 8 – 3 / 24
= 9 – 3 / 24
= 6 / 24
Gupta new share = 2/8 – 2/32
= 16 – 4 / 64
= 12 / 64
Khan’s new share = 3 / 8 – 3 /40
= 15 – 3 / 40
= 12 / 40
New profit sharing ratio of singh, Gupta, khan and Jain
Jain share = 3/ 24 + 2 / 32 + 3 /40
= 60 + 30 + 36 / 480
= 126 / 480
New profit sharing ratio of singh, Gupta, khan and Jain is
= 6 / 24 x 20 /20 : 12 / 64 x 7.5 /7.5 : 12 / 40 x 12 /12 : 126 / 480
= 120/480 : 90 /480 : 144/480 : 126/ 480
= 20 : 15 : 24 : 21
11. Sandeep and Navdeep are partners in a firm sharing profits in 5:3 ratio. They admit C into the firm and the new profit sharing ratio was agreed at 4:2:1. Calculate the sacrificing ratio?
Solution –
Calculation of Sacrificing ratio of Sandeep and Navdeep
Old Ratio of Sandeep and Navdeep is 5:3
C is admitted
New profit sharing ratio of Sandeep, Navdeep and = 4 : 2: 1
Sandeep Sacrifices = 5 / 8 – 4 / 7
= 35 – 32 / 56
= 3 / 56 (Sacrifice)
Navdeep sacrifices = 3 / 8 – 2 / 7
= 21 – 16 / 56
= 5 / 56 (Sacrifice)
Sacrificing Ratio of Sandeep and Navdeep is 3:5
12. Rao and Swami are partners in a firm sharing profits and losses in 3:2 ratio. They admit Ravi as a new partner for 1/8 share in the profits. The new profit sharing ratio between Rao and Swami is 4:3. Calculate new profit sharing ratio and sacrificing ratio?
Solution –
Old profit sharing ratio of Rao and Swami = 3:2
Ravi is admitted for 1/8th share
Remaining share = 1 – 1/8
= 7 / 8
Remaining share would be distributed by Rao and Swami = 4:3
Rao’s new share = 7/ 8 x 4 / 7
= 28 / 56
Swami new share = 7 / 8 x 3/ 7
= 21 / 56
New profit sharing ratio after making base equal
= 28 / 56 : 21 / 56 : 1 / 8 x 7 / 7
= 28 : 21 : 7
= 4 : 3: 1
Calculation of Sacrificing Ratio of Rao & Swami
Old Rati = 3:2
New Ratio = 4:3:1
Rao = 3/5 – 4/8
= 24 – 20 /40
= 4 / 40
Swami = 2/5 – 3/8
= 16 – 15 / 40
= 1/40
Sacrificing Ratio of Rao & Swami = 4:1
13. Compute the value of goodwill on the basis of four years’ purchases of the average profits based on the last five years? The profits for the last five years were as follows:
Solution –
Calculation of Goodwill of the firm
Average profit of cost
5 years = 40,000 + 50,000 + 60,000 + 50,000 + 60,000 / 5
= 2, 60,000 /5
= Rs.52,000
Goodwill of the firm = Average profit of Cost x 4 years of purchase 5 years
= 52,000 x 4
= Rs.2,08,000
14. Frim’s Captial in a business is Rs.2,00,000. The normal rate of return on firm’s capital is 15%. During the year 2015 the firm earned a profit of Rs.48,000. Calculate goodwill on the basis of 3 years purchase of super profit?
Solution –
Calculation of Goodwill of the firm
Normal Profit = Capital Employed x Normal Rate of Return
= 2,00,000 x 15%
= 30,000
Super profit = Average profit – Normal profit
= 48,000 – 30,000
= 18,000
= 54,000
15. The books of Ram and Bharat showed that the firm’s capital on 31.12.2016 was Rs.5,00,000 and the profits for the last 5 years: 2015 Rs.40,000; 2014 Rs.50,000; 2013 Rs.55,000; 2012 Rs.70,000 and 2011 Rs.85,000. Calculate the value of goodwill on the basis of 3 years purchase of the average super profit of the last 5 years assuming that the normal rate of return is 10%?
Solution –
Average profit of cost 5 years = 40000 + 50000 + 55000 + 70000 + 85000 / 5
= 3,00,000 / 5
= 60,000
Normal profit = Capital Employed x normal Rate of Return
= 5,00,000 x 10%
= 50,000
Super profit = Average profit – Normal profit
= 60,000 – 50,000
= 10,000
Goodwill = super profit x 3 years purchase
= 10,000 x 3
= Rs.30,000
16. Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs.3,00,000; Rajani Rs.2,00,000. During the year 2015 the firm earned a profit of Rs.1,50,000. Calculate the value of goodwill of the firm by capitalization method assuming that the normal rate of return is 20%?
Solution –
Capital Employed = Rajan’s Capital + Rajani’s Capital
= 3,00,000 + 2,00,000
= 5,00,000
Capitalised valued of Ave. profit = Ave. profit/normal rate of return
= 1,50,000 x 100 / 20
= 7,50,000
Goodwill of the Frim = Capitalised value – Capital Emp. of Ave. profit
= 7,50,000 – 5,00,000
= 2,50,000
17. A business has earned average profits of Rs.1,00,000 during the last few years. Find out the value of goodwill by capitalization method, given that the assets of the business are Rs.10,00,000 and its external liabilities are Rs.1,80,000. The normal rate of return is 10%?
Solution –
Calculation of Goodwill of the firm
Capital Employed = Assets – External liabilities
= 10,00,000 – 1,80,000
= 8,20,000
Capitalised valued of Ave. profit = Ave. profit / Normal rate of return
= 1,00,000 x 100 / 10
= 10,00,000
Goodwill of the Frim = Capitalised value of – Capital Employed Ave. profit
= 10,00,000 – 8,20,000
= 1,80,000
18. Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3. They admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in Rs.20,000 as capital and Rs.4,000 as his share of goodwill premium. Give the necessary journal entries:
- When the amount of goodwill is retained in the business.
- When the amount of goodwill is fully withdrawn.
- When 50% of the amount of goodwill is fully withdrawn.
- When goodwill is paid privately.
Solution –
Case – a)
Journal
Case – b)
Journal
Case – c)
Journal
Case – d)
When goodwill is paid privately, no entry is passed in the books of the accounts.
19. A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They decide to admit C into partnership with 1/4 share in profits. C will bring in Rs.30,000 for capital and the requisite amount of goodwill premium in cash. The goodwill of the firm is valued at Rs.20,000. The new profit sharing ratio is 2:1:1. A and B withdraw their share of goodwill. Give necessary journal entries?
Solution –
Journal
Calculation of Sacrificing Ratio of the Partners.
Old Ratio = 3:2
New Ratio = 2:1:1
A = 3/5 – 2/4
= 12 – 10 / 20
= 2/20
B = 2/5 – 1/4
= 8 – 5 /20
= 3/20
Sacrificing Ratio of A & B is = 2:3
20. Arti and Bharti are partners in a firm sharing profits in 3:2 ratio. They admitted sarthi for 1/4 share in the profits of the firm. sarthi brings Rs.50,000 for his capital and Rs.10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs.5,000. The new profit sharing ratio between Arti, Bharti and sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm?
Solution –
Journal
Calculation of Sacrificing Ratio of the Partners
Old Ratio = 3:2
New Ratio = 2:1:1
Arti = 3/5 – 2/4
= 12 – 10 / 20
= 2 / 20
Bharti = 2/5 – 1/4
= 8 – 5 /20
= 3 / 20
Sacrificing Ratio of A & B is 2:3
21. X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought Rs.20,000 for his capital and Rs.7,000 for his 1/8 share of goodwill. Goodwill already appears in the books at Rs.40,000. Show necessary journal entries in the books of X, Y and Z?
Solution –
22. Aditya and Balan are partners sharing profits and losses in 3:2 ratio. They admitted Christopher for 1/4 share in the profits. The new profit sharing ratio agreed was 2:1:1. Christopher brought Rs.50,000 for his capital. His share of goodwill was agreed to at Rs.15,000. Christopher could bring only Rs.10,000 out of his share of goodwill. Record necessary journal entries in the books of the firm?
Solution –
Journal
Calculation of Sacrificing Ratio of the Partners
Old Ratio = 3:2
New Ratio = 2:1:1
Aditya = 3/5 – 2/4
= 12 – 10 / 20
= 2/ 20
Balan = 2/5 – 1/4
= 8 – 5/20
= 3/20
23. Amar and Samar were partners in a firm sharing profits and losses in 3:1 ratio. They admitted Kanwar for 1/4 share of profits. Kanwar could not bring his share of goodwill premium in cash. The Goodwill of the firm was valued at Rs.80,000 on Kanwar’s admission. Record necessary journal entry for goodwill on Kanwar’s admission.
Solution –
Journal
24. Mohan Lal and sohan Lal were partners in a firm sharing profits and losses in 3:2 ratio. They admitted Ram Lal for 1/4 share on 1.1.2013. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profits of last 4 years which were Rs.50,000 for 2013, Rs.60,000 for 2014, Rs.90,000 for 2015 and Rs.70,000 for 2016. Ram Lal did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram Lal’s admission when:
- Goodwill already appears in the books at Rs.2,02,500.
- Goodwill appears in the books at Rs.2,500.
- Goodwill appears in the books at Rs.2,05,000.
Solution –
Journal
Calculation of Goodwill of the firm
Average profit of cost 4 Years = 50,000 + 60,000 + 90,000 + 70,000/4
= 270000/4
= Rs.67500
Goodwill of the firm = Aver. Profit of cost 4 years x 3 years Purchase
= 67500 x 3
= 202500
Ram Lal’s share in Goodwill = 202500 x 1/4
= Rs.50625
25. Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, mukesh and Hari is 4:3:2. On Hari’s admission goodwill of the firm is valued at Rs.36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari’s admission.
Solution –
Journal
Calculation of Sacrificing Ratio of the partners
Old Ratio = 1:1
New Ratio = 4:3:2
Rajesh = 1.2 – 4/9
= 9 – 8 / 18
= 1/ 18
Mukesh = ½ – 3/9
= 9 – 6 / 18
= 3/18
Sacrificing Ratio of Rajesh & Mukesh is 1:3
26. Amar and Akbar are equal partners in a firm. They admitted Anthony as a new partner and the new profit sharing ratio is 4:3:2. Anthony could not bring this share of goodwill rS.45,000 in cash. It is decided to do adjustment of goodwill without opening goodwill account. Pass the necessary journal entry for the treatment of goodwill?
Solution –
Journal
Calculation of Sacrificing Ratio of the Partners
Old Ratio = 1:1
New Ratio = 4:3:2
Amar = 1/2 – 4/9
= 9 – 8 / 18
= 1/ 18
Akbar = 1/ 2 – 3/9
= 9 – 6 /18
= 3/18
Sacrificing Ratio of Amar & Akbar is 1:3
27. Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.
Balance Sheet of A and B as at March 31, 2016
C is admitted as a partner on the date of the balance sheet on the following terms:
- C will bring in Rs.1,00,000 as his capital and Rs.60,000 as his share of goodwill for 1/4 share in the profits.
- Plant is to be appreciated to Rs.1,20,000 and the value of buildings is to be appreciated by 10%.
- Stock is found over valued by Rs.4,000.
- A provision for bad and doubtful debts is to be created at 5% of debtors.
- Creditors were unrecorded to the extent of Rs.1,000.
Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of C.
Solution –
Journal
28. Leela and Meeta were partners in a firm sharing profits and losses in the ratio of 5:3. In April 2017 they admitted Om as a new partner. On the date of Om’s admission the balance sheet of Leela and Meeta showed a balance of Rs.16,000 in general reserve and Rs.24,000 (Cr) in Profit and Loss Account. Record necessary journal entries for the treatment of these items on Om’s admission. The new profit sharing ratio between Leela. Meeta and Om was 5:3:2.
Solution –
Journal
29. Amit and Viney are partners in a firm sharing profits and losses in 3:1 ratio. On 1.1.2017 they admitted Ranjan as a partner. On Ranjan’s admission the profit and loss account of Amit and Viney showed a debt balance of Rs.40,000. Record necessary journal entry for the treatment of the same.
Solution –
Journal
30. A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:
Balance Sheet of A and B as at March 31, 2016
On April 1. 2017, C were admitted into partnership on the following terms:
- That C pays Rs.10,000 as his capital.
- That C pays Rs.5, 000 for goodwill. Half of this sum is to be withdrawn by A and B.
- That stock and fixtures be reduced by 10% and a 5% provision for doubtful debts be created on Sundry Debtors and Bills Receivable.
- That the value of Land and buildings be appreciated by 20%
- There being a claim against the firm for damages, a liability to the extent of Rs.1,000 should be created.
- An item of Rs.650 included in sundry creditors is not likely to be claimed and hence should be written back.
Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C.
Solution –
Journal
31. A and B are partners sharing profits and losses in the ratio of 3:1. On 1st April, 2017 they admitted C as a new partner for 1/4 share in the profits of the firm. C brings Rs.20,000 as for his 1/4 share in the profit of the firm. The capitals of A and B after all adjustments in respect of goodwill, revaluation of assets and liabilities, etc. has been worked out at Rs.50,000 for A and Rs.12,000 for B. It is agreed that partners’ capitals will be according to new profit sharing ratio. Calculate the new capitals of A and B and pass the necessary journal entries assuming that A and B brought in or withdrew the necessary cash as the case may be for making their capitals in proportion to their profit sharing ratio?
Solution –Journal
Calculation on of New Profit Sharing Ratio of A & B in 3:1
Old Ratio of A & B = 3:1
C admitted for 1/4th share
Remaining share = 1- 1/4
= 3/4
A’s new share = 3/4 x 3/4
= 9 / 16
B’s New share = 3/4 x 1/4
= 3/16
New profit sharing ratio after making base equal
= 9/16 : 3/16 : 1/4 x 4/4
= 9: 3: 4
Calculation of Partner’s capital in New firm
Total capital in new firm = C’s Capital x Reciprocal of his share
= 20000 x 4
= Rs.80,000
A’s Capital in new firm = 80,000 x 9/16
= 45000
B’s Capital in new firm = 80,000 x 3/16
= 15000
C’s capital in new firm = 80,000 x 4/16
= 20,000
32. Pinky, Qumar and Roopa partners in a firm sharing profits and losses in the ratio of 3:2:1. S is admitted as a new partner for 1/4 share in the profits of the firm, which he gets 1/8 from Pinky, and 1/16 each from Qmar and Roopa. The total capital of the new firm after Seema’s admission will be Rs.2,40,000. Seema is required to bring in cash equal to 1/4 of the total capital of the new firm. The capitals of the old partners also have to be adjusted in proportion of their profit sharing ratio. The capitals of Pinky, Qmar and Roopa after all adjustments in respect of goodwill and revaluation of assets and liabilities have been made are Pinky Rs.80,000, Qmar Rs.30,000 and Roopa Rs.20,000. Calculate the capitals of all the partners and record the necessary journal entries for doing adjustments in respect of capitals according to the agreement between the partners?
Solution –
Journal
Calculation of New profit sharing ratio of partners
Old Ratio of Pinky, Qumar & Roopa is 3:2:1
S admitted for 1/4th share which he gets 1/8 from pinky and 1/16th each from Qumar and Roopa
Pinky’s New share = 3/6 – 1/8
= 12 – 3/24
= 9/24
Qumar’s New share = 2/6 – 1/16
= 16 – 3/48
= 13 / 48
Roopa’s New share = 1/6 – 1/16
= 8 – 3/48
= 5/48
New Profit sharing ratio after making base equal
= 9/24 x 2/2 : 13/48 : 5/48 : 1/4 x 12/12
= 10 : 13 : 5 : 12
Calculation of Partner’s Capital in new firm
Total Capital in New Firm = Rs.240000
Pinky capital in new firm = 24,0000 x 18/48
= 90,000
Qumar Capital in new firm = 240000 x 13/ 48
= 65000
Roopa Capital in new firm = 240000 x 5/48
= 25000
S Capital in new firm = 240000 x 12 / 48
= 60,000
33. The following was the Balance Sheet of Arun, Bablu and Chetan sharing profits and losses in the ratio of 6/14 : 5/14 : 3/14 respectively.
The agreed to take Deepak into partnership and give him a share of 1/8 on the following terms: a) that Deepak should bring in Rs.4,200 as goodwill and Rs.7,000 as his Capital; (b) that furniture be depreciated by 12%; (c) that stock be depreciated by 10% (d) that a Reserve of 5% be created for doubtful debts; (e) that the value of land and buildings having appreciated be brought upto Rs.31,000; (f) that after making the adjustments the capital accounts of the old partners (who continue to share in the same proportion as before) be adjusted on the basis of the proportion of Deepak’s Capital to his share in the business, i.e., actual cash to be paid off to , or brought in by the old partners as the case may be.
Prepare Cash Account, Profit and Loss Adjustment Account (Revaluation Account) and the Opening Balance Sheet of the new frim.
Solution –
Dr. Revaluation A/c Cr.
Calculation of Partner’s Capital In New Firm
Total Capital in new firm = Deepak’s Capital x Reciprocal of his share
= 7000 x 8
= 56,000
Arun’s share in new firm = 56000 x 6/16
= 21,000
Bablu’s share in new firm = 56000 x 5/16
= 17500
Chetan’s Share in new firm = 56000 x 3/16
= 10,500
Calculation of Partner’s New Profit sharing Ratio
Old Ratio of Arun Bablu & Chetan = 6 : 5: 3
Deepak admitted for = 1/8 share
Remaining share = 1 – 1/8
= 7/8
Arun’s new share = 7/8 x 6/14
= 42 / 112
Bablu’s New share = 7/8 x 5/14
= 35 / 112
Chetan’s New share = 7 / 8 x 3/14
= 21 / 112
New profit sharing Ratio of Arun, Bablu chetan & Deepak
= 42/112 : 35/112 : 21/112 : 1/8 x 14/14
= 6 : 5 : 3 : 2
Calculation of partner’s share in Goodwill of the firm
Deepak Premium for goodwill = Rs.4200
It would be shared by old partners in their profit sharing ratio 6 : 5 : 3
Arun’s share = 4200 x 6/14
= 1800
Bablu’s share = 4200 x 5/14
= 1500
Chetan’s share = 4200 x 3/14
= 900
Journal
Premium for Goodwill A/c Dr. 4200
To Arun capital a/c 1800
To Bablu capital A/c 1500
To Chetan capital A/c 900
34. Azad and Babli are partners in a firm sharing profits and losses in the ratio of 2:1. Chintan is admitted into the firm with 1/4 share in profits. Chintan will bring in Rs.30,000 as his capital and the Azad and Babli are to be adjusted in the profit sharing ratio. The Balance sheet of Azad and Babli as on March 31, 2016 (before Chintan’s admission) was as follows:
Balance Sheet of A and B as on 31.03.2016
It was agreed that:
- Chintan will bring in Rs.12,000 as his share of goodwill premium.
- Buildings were valued at Rs.45,000 and Machinery at Rs.23,000.
- A provision for doubtful debts is to be created @ 6% on debtors.
- The capital accounts of Azad and Babli are to be adjusted by opening current accounts.
Record necessary journal entries, show necessary ledger accounts and prepare the Balance Sheet after admission.
Solution –
Balance Sheet of A and B as on 31.03.2016
Calculation of new profit sharing ratio of partners
Old ratio of Azad, Babli = 2:1
Chintan admitted for 1/4th share
Remaining share = 1 – 1/4
= 3/4
Azad’s new share = 3/4 x 2/3
= 6/12
Babli’s new share = 3/4 x 1/3
= 3/12
New profit sharing ratio of Azad, Babli and chintan is
= 6/12 : 3/12 : 1/4 x 3/3
= 2:1:1
Calculation of Partner’s Capital in New Firm
Total Capital of the new firm = Chintan’s Capital x Reciprocal of his share
= 30,000 x 4
= 1,20,000
Azad capital in new firm = 120000 x 2/4
= 60,000
Babli capital in new firm = 120000 x 1/4
= 60,000
Chintan capital in new firm = 120000 x 1/4
= 30,000
Calculation of partner’s share in goodwill of the firm
Chintan premium for Goodwill is = 12000
Azad and Babli will share it in their sacrificing ratio i.e. 2:1
Azad’s share = 12000 x 2/3
= 8000
Babli’s share = 12000 x 1/3
= 4000
Journal
Premium for Goodwill A/c Dr. 12000
To Azad capital A/c 8000
To babli Capital A/c 4000
35. Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan. 01, 2015 they admitted Vimal for 1/5 share in the profits. The Balance Sheet of Ashish and Dutta as on March 31, 2016 was as follows:
Balance Sheet of A and B as on 1.03.2016
It was agreed that:
- The value of Land and Building be increased by Rs.15,000.
- The value of plant be increased by 10,000.
- Goodwill of the firm be valued at Rs.20,000.
- Vimal to bring in capital to the extent of 1/5th of the total capital of the new firm.
Record the necessary journal entries and prepare the Balance Sheet of the firm after Vimal’s admission.
Solution –
Journal
Calculation of Partner’s share in Goodwill of the firm
Goodwill of the firm = Rs.20,000
Viaml share = 20,000 x 1/5
= 4,000
Ashish share = 4000 x 3/5
= 2400
Dutta share = 4000 x 2/5
= 1600
Journal
Vimal’s Current A/c Dr. 4000
To Ashish capital A/c 2400
To Dutta Capital A/c 1600
Calculation of Vimal Capital in new firm
Total Capital in new firm = Adjusted capital of the x reciprocal of combined share
= (97400 + 46600) x (1 – 1/5)
= 144000 x 5/4
= 180000
Vimal Capital in new firm = 180000 x 1/5
= 36000