Practical Problem 04
Practical Problems | Q 4 | Page 204
Virendra, Devendra AND Narendra Were partners Sharing Profit and Losses in the RATIO of 3:2:1. | |||
Their BALANCE Sheet AS on 31st March 2019 WAS AS follows. | |||
BALANCE Sheet AS on 31st March 2019 | |||
Liabilities | Amount | Assets | Amount |
Bank Loan | 25,000 | Furniture | 50,000 |
Creditors | 20,000 | Land & Building | 50,000 |
Bills Payable | 5,000 | Motor Car | 20,000 |
Reserve Fund | 30,000 | Sundry Debtors | 50,000 |
Capital Account : | Bills Receivable | 20,000 | |
Virendra | 90,000 | Investments | 50,000 |
Devendra | 60,000 | Cash at Bank | 20,000 |
Narendra | 30,000 | ||
2,60,000 |
| 2,60,000 | |
Mr. Virendra died on 31st August 2019 AND the partnership deed provided that the event | |||
of the DEATH of Mr. Virendra his executors be entitled to be PAID out. | |||
1. The CAPITAL to his credit AT the DATE of DEATH. | |||
2. His proportion of Reserve AT the DATE of LAST BALANCE sheet. | |||
3. His proportion of Profits to DATE of DEATH BASED on the AVERAGE profits of the LAST four YEARS. | |||
4. His SHARE of Goodwill should be CALCULATED AT two YEARS PURCHASE of the profits of the LAST four | |||
YEARS for the YEAR ended 31st MARCH were AS follows – | |||
2016 Rs 40,000 2017 Rs 60,000 2018 Rs 70,000 2019 Rs 30,000 | |||
5. Mr. VIRENDRA HAS DRAWN ` 3000 p.m. to DATE of DEATH, There is no Increase and Decrease the Value of Assets and Liabilities. | |||
Prepare Mr. Virendra Executors A/c | |||
Working:
1) Calculation of Share of Goodwill |
Goodwill = Average Profit x No of year of Purchase |
= (40,000 + 60,000 + 70,000 + 30,000)/4 x 2 |
= 2,00,000/4 x 2 |
= 50,000 x 2 |
= 1,00,000 |
2) Ramesh Share of Goodwill = Firm Goodwill x Ramesh Share |
= 3,60,000 x 3/6 |
= Rs 50,000 |
Calculation of Share of Profit Due to Ramesh |
3) Share of Profit Due to Ramesh = Last Year Profit x Share of Profit x Period |
= 50,000 x 3/6 x 5/12 |
= 10,417 (Profit & Loss Suspense A/c) |
Solution:
In the books of the partnership Firm | |||
Dr Virendar’s Capital A/c Cr | |||
Particulars | Amount | Particulars | Amount |
To Drawings A/c (3,000 x 5 Months) | 15,000 | By Balance b/d | 90,000 |
By Goodwill A/c | 50,000 | ||
By Profit & Loss Suspense A/c | 10,417 | ||
By Reserve Fund A/c | 15,000 | ||
1,65,417 | 1,65,417 | ||