Question

A and B are partners in a firm sharing profits and losses as 3/5 and 2/5.C, comes in for 1/5^th share of profit. He pays Rs. 8,000 as goodwill premium and 50% of the adjusted capitals of A and B. Balance Sheet of A and B on the date of Cs’ admission stand as follows: Balance Sheet

Land and Buildings are to be valued at Rs. 40,000. Plant is to be depreciated by 10% and stock by Rs. 500.Sundry Debtors is worth Rs. 31,750. A liability of Rs. 1,750 for outstanding expenses has been omitted to be recorded in the books. A and B have a joint life policy of Rs. 15,000 not shown in the books, the premium for which has been charged to Profit & Loss Account. The surrender value of the policy on the date of admissions is Rs. 2,000, and is agreed to raise a life policy account in the books at this value. Give Journal Entries.

Answer 1

Journal

Revaluation A/c

Dr. Partner’s Capital A/c Cr.

Capital to be brought in by C = 50% of the adjusted capital of A and B. i.e., = 50% of 57,500+ 40,000 = 50% of 97,500 = 48,750.