Assignment -Retirement & Death of a Partner

Q.1 A, B and C are partners in a firm. A retires on 1st April, 2012. On the date of retirement. Rs.80, 000 is due to him in all. It is agreed to pay him this amount in installments every year at the end of the year. Prepare A's Loan A/c in the following cases:

        I.            Four yearly installments plus interest @ 10% p.a.

      II.            Three installments of Rs.25, 000 which already include interest @ 10%p.a on the outstanding balance and the balance including interest in the fourth year.

Books are closed on 31st March every year.

Q.2  Naresh, David and Aslam are partners sharing profits in the ratio of 5:3:7. On April 1st, 2012,       Naresh gave a notice to retire from the firm. David and Aslam decided to share future profits in the     ratio of 2:3. The adjusted capital accounts of David and Aslam show a balance of Rs.33, 000 and Rs.70,500 respectively. The total amount to be paid to Naresh is Rs.90,500. This amount is to be paid by David and Aslam in such a way that their capital become proportionate to their new profit sharing ratio. Pass necessary journal entries for the above transactions in the books of the firm.       

Show  your working clearly.

Q.3  Vikas, Vishal and Vaibhav were partners in a firm sharing profits in the ratio of 2:2:1.The firm closes its books on 31st March, every year. On 31-12-2015 Vaibhav died. On that date his Capital account showed a credit balance of Rs.3,80,000 and Goodwill of the firm was valued at Rs.1,20,000. There was a debit balance of Rs.50,000 in the Profit & Loss A/c. Vaibhav's share of profit in the year of his death was to be calculated on the basis of the average profit of last five years. The average profit of last five year was Rs.75,000.

Pass necessary journal entries in the books of the firm on Vaibhav’s death.

Q.4  The Balance Sheet of Sudha, Rahim and Kartik who were sharing profit in the ratio of 3:3:4 as at 31st March, 2012 was as follows:

Sudha died on June 30th 2012. The partnership deed provided for the following on the death of a partner:

(a) Goodwill of the firm be valued at two years purchase of average profits for the last three years.

(b) Sudha's  share of profit or loss till the date of her death was to be calculated on the basis of sales. Sales for the year ended 31st March, 2012 amounted to Rs.4,00,000 and that from 1st April to 30th June 2012 to Rs.1,50,000.  The profit for the year ended 31st March, 2012 was Rs.1,00,000.

(c) Interest on capital was to be provided @ 6% p.a.

(d) The average profits of the last three years were Rs.42,000.

(e) According to Sudha's will, the executors should donate her share to “Matri Chhaya ----- an orphanage for girls".

Prepare Sudha's Capital Account to be rendered to her executor. Also identify the value being highlighted in the question.

Q.5  A, B and C were partners in a firm whose Balance Sheet as at 31st March, 2012 was as below:

 B retired on that date and in this connection it was decided to make the following adjustments :

(a) To reduce stock and furniture by 5% and 10% respectively; 

(b) To provide for doubtful debts at 5% on debtors.

Rent outstanding (not provided for as yet) was Rs.260. Goodwill was valued at  Rs.4,200. A and C decided :

(i)                 To Share profits and losses in 5:3 respectively;

(ii)               To re-adjust their capitals in the profit sharing ratio; and

(iii)             To bring in sufficient cash to pay off B immediately and to leave a balance of Rs.1,000 in the Bank. B was paid off.

Give Journal entries to record the above and draft the Balance Sheet of the new firm.

Q.6  Kanu, Manu and Akansha are partners sharing profits as 20%, 30% and 50% Kanu decided to retire with the consent of other partners and sold her share to Mare Goodwill was valued at two and a half years purchase of the average profits of the years. Profits of these three years were Rs.50,000, Rs.70,000 and Rs.60,000. Reserve find stood in the balance sheet at Rs.30,000 at the time of her retirement. You are required to record necessary journal entries to record above adjustments on Kanu's retirement.  Also prepare her capital account to find out the amount due to her when he balance in the balance sheet was Rs.1,00,000 before any above adjustment.

Q.7  Arti,Bharti and Seema are partners sharing profits in the proportion of 3:2:1 and chair Balance Sheet on March 31, 2015 stood as follows:

Bharti died on June 12, 2015 and according to the deed of the said partnership her executors are entitled to be paid as under:

(i) The capital to her credit at the time of her death and interest thereon @ 10% per annum.

(ii) Her proportionate share of reserve fund.

(iii) Her share of profits for the intervening period will be based  on the sales during that period, which were calculated as 1,00,000. The rate of profit during past that period, which were calculated as 1,00,000. The rate of profit during past three years had been 10% on sales.

(iv) Goodwill according to her share of profit to be calculated by taking twice the amount of the average profit of the last three years less 20%. The profits of the previous years were :

                                2013          Rs.8200

                                2014          Rs.9000

                                2015          Rs.9800

The investments were sold at par and her executors were paid out. Pass the necessary Journal entries and write the account of the executors of Bharti.

Q.8  X. Y and Z were partners in a firm sharing profits as in the ratio of 5 -3.9. 31-3-2015 their Balance Sheet was as follows:

 1. Goodwill of the firm was valued at 51,000.

 2. There was a claim of 4,000 for Workmen's Compensation.

 3. Provision for bad debts was to be reduced by 1,000.

 4. Y will be paid 38,200 in cash and the balance will be transferred in his loan account which will be 

      paid in four equal yearly installments together with interest @10% p.a.

 5. The new profit sharing ratio between X and Z will be 3:2 and their capitals will be in their new              profit sharing ratio. The capital adjustment will be done by opening current accounts.

Prepare Revaluation Account, Partners’ Capital Accounts of the reconstituted firm.

 Q.9  A, B and C were carrying on business with the following assets with effect from  Ist April, 2011 : Furniture Rs.18,000; Machine Rs.72,000; Cash Rs.10,000; Debtors Rs.20,000. Their profit-sharing ratio was 5:3:2. Capital is also shared in the same ratio.

It died on 30th September, 2011. His son claimed his father's interest in the firm.

The following was the settlement :

(1) Allow his capital to his credit on the date of death.

(2) Give 5% p.a. interest on his capital.

(3) He had been drawing @ Rs.600 per month which he withdrew at the beginning each month. He be allowed to retain these drawings as a part of his share of profit.

(4) Interest @ 6% p.a. be charged on his drawings.

(5) GoodWill was evaluated twice the average of profits which were Rs.21,000. 

Prepare B's Personal Account.