RETIREMENT PROBLEMS

Fahad, Husnain and Asad are partners, sharing profits and losses in the ratios of 5:3:2 respectively. Asad retired and the total goodwill of the firm is valued Rs. 40,000 assuming that Fahad and Husnain will continue the business and the to share profits in future in the ratios of 5:3. Pass the journal entries in the following cases.

    1. When the goodwill of the firm is raised.
    2. When the goodwill of the firm is raised at full value written off among the
      remaining partners.
    3. When only the retiring partner’s share of goodwill is raised
    4. When the one retiring partner’s share is raised and written off.
    5. 2.         C, D and E were partners, sharing profits and losses in the proportions ofone half, one third and one sixth respectively. The Balance Sheet of the firm on 31st. December, 2005 was as follows:
    6. Assets                             •

      Rs.

      -

      Liabilities

      Rs.

      Cash at Bank

      2,500

      Sundry Creditors

      19,000

      Debtors          16,000 Bills Payable

      5,000

      Less Reserve      500

      15,500

      Reserve Fund

      12,000

      Stock

      ..

      25,000

      Capital Account
      Motor Vans

      8,000

      c

      40,000

      Plant and machinery

      35,000

      D

      30,000

      Factory Building

      45,000

      E

      25,000

      Total

      11,31,000

      Total

      11,31,000

reures on tnat uate sutject to the fbi owing adjustments:

a)                   The goodwill of the firm to be valued at Rs. 18,000.

b)                  Plant to be depreciated by 10% and motor van by 15%.

c)                  Stock to be appreciated by 20% and building by 10% and

d)                  The reserve for doubtful debts to be increased by Rs. 1,950.

Pass the journal entries give the capital Accounts, the profit and loss adjustments Account, the goodwill Account and prepare the Balance Sheet of the continuing partners.

Answer:             Profit on Revaluation Rs. 2,850; Balance Sheet Total Rs.,51,850.

 

3.        The Balance Sheet of A, B and C sharing profits and losses in the proportions to their capitals stood as follows on 3V1 December, 2005.

Assets

—         ——

Amount

—-

Liabilities

Amount

Cash at Bank

3,500

Creditors 30,500
Debtors

35,000

Capitals
Stock

15,000

A                  20,000

Machinery

25,000

B                   15,000

Fixtures

2,000

C                  15,000

50,000
Total

80,500

..

_ Total

80,500

a e, L retires from the firm and for this purpose; the goodwill of the firm has been valued at Rs. 18,000. Stock has been revalued at Rs. 20,000. Machinery

at Rs. 15,000 and Fixture Rs. 1,000 and Reserve of Rs. 3,000 for doubtful debts has been agreed to be created.

Required:Pass journal entries to give effect to the above and show how the profit and loss adjustment Account and the capital Accounts of the partners which would appear after the necessary adjustments have been made. Show also the Balance Sheet of A and B

Answer:           Loss on Realization Rs. 9,000 Balance Sheet Total Rs. 89,500.

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