Use app×
Join Bloom Tuition
One on One Online Tuition
JEE MAIN 2025 Foundation Course
NEET 2025 Foundation Course
CLASS 12 FOUNDATION COURSE
CLASS 10 FOUNDATION COURSE
CLASS 9 FOUNDATION COURSE
CLASS 8 FOUNDATION COURSE
0 votes
46.8k views
in Accounting for Retirement and Death of Partner by (63.4k points)
edited by

A, B and C are partners, sharing profits and losses in the ratio of 2 : 2 : 1. C retires on 31st March, 2018. The balance sheet of the firm as at 31st December, 2017 stood as follows :
RBSE Solutions for Class 12 Accountancy Chapter 3 Accounting for Retirement and Death of Partner
In order to arrive at the balance due to C, it was mutually agreed that:

  1. Land and building be valued at Rs 12,00,000.
  2. Investment to be valued at Rs 1,00,000.
  3. Stock be taken at Rs 3,00,000.
  4. Goodwill be valued at two years’ purchase of the average profit of the past five years. Goodwill will not appear in the books of reconstituted firm,
  5. C’s share of profits upto the date of retirement be calculated on the basis of average profit of the preceding three years.
    The profits of the preceding five years were as under :
Year 2013 2014 2015 2016 2017
Profit(Rs) 1,80,000 2,20,000 3,00,000 2,75,000 3,25,000

6. Amount payable to C is to be transferred to his loan account carrying interest 10% p.a.

Your are required to prepare the Revaluation Account, Partners’ Capital Account, and the Balance Sheet as at 31st March, 2018.

Please log in or register to answer this question.

1 Answer

+1 vote
by (63.7k points)
edited by



Working Note:
(1) C’s Share in Profits:
Last three year’s profit = 3,25,000 + 2,75,000 + 3,00,000
Average profit of last three years profits = 9,00,000 ÷ 3 = Rs 3,00,000
Profit of three months = 3,00,000 x \(\frac{3}{12}\) = Rs 75,000
C’s share in profit = 75,000 x \(\frac{1}{5}\) = Rs 15,000

(2) Calculation of goodwill as follows :
On the basis of average profit of last year’s profit, 2 times
Averge profit of last 5 years  \(= \frac { 3,25,000 + 2,75,000 + 3,00,000+2,20,000 + 1,80,000 }{ 5 } \)

\(= \frac { 13,00,000 }{ 5 }\)

= Rs 2,60,000
Equal to 2 years purchase = 2,60,000 x 2 = Rs 5,20,000
C’s share of goodwill = 5,20,000 x \(\frac{1}{5}\) = Rs 10,4000

(3) Gain Ratio = Old Profit & Loss Ratio = 2:2:1
New Profit sharing ratio is not given.
C’s is retiring so gain ratio of A and B will 2 : 2 or 1 : 1 will be.
So, B and A will adjust the share of goodwill of C in equally.

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

Categories

...