Wednesday, January 23, 2019

AHSEC Accountancy Question Bank: Retirement of a Partner


Retirement of a Partner
Calculation of New ratio and Gaining Ratio and Treatment of Goodwill in case of Retirement of Partner
1. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires. Calculate new ratio and gaining ratio.
2. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires and his share is acquired by P and R equally. Calculate new ratio and gaining ratio.
3. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires and his share is acquired entirely by P. Calculate new ratio and gaining ratio.
4. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires and amount standing to his credit after all adjustment is Rs. 5,00,000 which is contributed by P and R Rs. 3,00,000 and Rs. 2,00,000 respectively.
5. X, Y and Z were partners sharing profits in proportion to 5:3:2. Goodwill does not appear in the books but it is agreed to be worth of Rs. 1, 00, 000. X retires from the firm and Y and Z decide to share future profits equally. You are required to make adjustment entry for goodwill without opening Goodwill Account at all. Show your workings clearly.
6. A, B and C are partners sharing profits in the ratio 3:4:2. B retires and the goodwill of the firm is valued at        Rs. 16,200. No Goodwill Account appears in the books of the firm. A and C decide to share profits in the ratio of 5:3. No goodwill is to be raised in the books of the firm. Give journal entries to record the above.
7. A, B and C are partners sharing profits and losses in the ratio of 4:3:2. C retires from the business. The value of the goodwill is Rs. 1, 20, 000. Goodwill appears in the books at Rs. 30,000 and it will remain at that figure. A and B decided to share the profits and losses in the ratio of 2:1. Pass necessary journal entry.
8. X, Y and Z are partners sharing profits and losses in the ratio of 3:2:1. X retires from the business. His share of goodwill is Rs. 20,000. Goodwill appears in the books at its full value and it has been decided not to show goodwill in the books. Y and Z decided to share profits and losses in the ratio 3:2. Pass necessary journal entry.
9. A, B and C are partners. They share profits and losses in the ratio of 4 : 3 : 1. On 1st January, 2011 B retires from the business. Goodwill is appearing in the books at Rs. 10,000. For the purpose of B’s retirement, goodwill is to be valued at two years purchase of average profits of the five year’s immediately preceding the retirement. The profit for the year: 2006, 2007, 2009 and 2010 were Rs. 8,000; Rs. 12,000; Rs. 16,000; Rs. 20,000 and Rs. 10,000 respectively. No goodwill is to be shown in the books of the firm.  Pass journal entries.
10. Bhim, Nakul and Sahadev are partners sharing profits in the ratio 2 : 3 : 5. Goodwill appears in the books at Rs. 50,000. Bhim retires and on the day of his retirement goodwill is valued at Rs. 45,000. Nakul and Sahadev decided to share future profits equally. Pass necessary journal entries.

Retirement of a Partner
Q.1. A, B and C were in partnership sharing profits and losses as 3:2:1 respectively. On 1st January, 2018 B retired from the firm. On that date, their Balance Sheet was as follows:
Liabilities
Rs.
Assets
Rs.
Trade Creditors
Bills Payable
Expenses Owing
Reserve Fund
Capital:
A: 10,000
B:   7,000
C:   5,500
1,500
2,250
2,250
6,750



22,500
Cash in hand
Cash at Bank
Debtors
Stock
Factory premises
Machinery
Furniture
750
3,750
7,500
6,000
11,250
4,000
2,000

35,250

35,250
The terms were:
a)      Goodwill of the firm was valued at Rs. 9,000.
b)      Expenses owing were to be brought down to Rs. 2,000
c)      Machinery and Furniture were to be valued at 10% less than their book values.
d)      Factory premises was to be revalued at Rs. 15,000
e)      Factory premises are sold and 10,000 is paid to the retiring partner and balance transferred to his loan account.
Show the Revaluation Account, Partner’s Capital Accounts and Prepare the Balance Sheet of the firm after the retirement of B. Also pass necessary journal entries.

Q.2. A, B and C are partners in a firm sharing profits and losses in the ratio of 4:3:1. Their Balance Sheet as at 31 December, 2018 stood as follows:
Liabilities
Rs.
Assets
Rs.
Capital:
A: 15,000
B: 11,250
C:   7,500
Sundry Creditors



33,750
5,150
Land & Buildings
Plant & Machinery
Sundry Debtors        3,800
Less: Reserve               100
Stock
Cash at Bank
18,700
4,100

3,700
6,000
6,400

38,900

38,900
B retires on the date subject to the following terms:
a)      The goodwill of the firm is to be valued at Rs. 18,000 and B’s share of the same be adjusted into the accounts of A and C who are going to share profits and losses in future in the ratio of 5 : 3.
b)      Plant and Machinery is to be depreciated by 10%.
c)      A 5% reserve is to be maintained for doubtful debts on the debtors.
d)      Stock is to be appreciated by 20% and Land and Buildings by 10%.
e)      An amount of Rs. 1,000 included in sundry creditors is not likely to be claimed.
f)       A provision of Rs. 600 be made in respect of outstanding legal charges.
g)      Prepare a Revaluation Account, Partner’s Capital Accounts and the Reconstituted Balance Sheet of the firm of A and C.
Q.3. The Balance Sheet of A, B, and C given below: [A.H.S.E.C – 1997]
Liabilities
Rs.
Assets
Rs.
Creditors
Capital: 
A: 30,000
B: 20,000
C: 15,000
20,000



65,000
Goodwill
Fixed Assets
Debtors
Cash
5,000
60,000
15,000
5,000

85,000

85,000
B retires on the following conditions:
a)      Goodwill is to be valued at Rs. 20,000.
b)      Computer valued at Rs. 10,000.
c)      There is an unpaid liability worth Rs. 10,000 which is not shown in the balance sheet.
d)      Fixed Assets are to be appreciated by Rs. 6,000 and creditors will not claim Rs. 300.
e)      A and C agree to share profits in the ratio of 3:2. The remaining partners will bring cash to pay off B in such a way that their capital becomes in proportion to their sharing ratio.
Give Journal Entries and Balance Sheet.                               
Q.4. Ram, Shyam and Mohan were in partnership sharing profits and losses in the ratio of 3: 2: 1. On 1.1.2018 Shyam retires from the firm. On that date, the balance sheet of the firm was as follows: [A.H.S.E.C – 2002]
Liabilities
Rs.
Assets
Rs.
Sundry Creditors
Reserve
Bills Payable
Capital A/c:
    Ram                     20,000
    Shyam                 15,000
    Mohan                12,000
5,000
6,000
2,600



47,000
Cash in hand
Debtors                     15,000
Less: Provision           1,500
Stock
Furniture
Premise
Investment
600

13,500
18,500
8,000
10,000
10,000

60,600

60,600
The terms of retirement were:
a)      Goodwill of the firm was valued at Rs. 12,000
b)      Premises to be appreciated by Rs. 5,000
c)      Furniture to be depreciated by Rs. 1,000
d)      Investment taken over by Shyam for Rs. 12,000.
e)      Workmen compensation liability Rs. 1,000
f)       Provision for bad debts to be increased by Rs. 1, 400
g)      The amount due to the retiring is paid in full which is contributed by Ram and Mohan in their respective capital ratio.
Pass Journal Entries to record the necessary adjustments for the retirement of Shyam and also prepare the balance Sheet of the firm after Shyam’s retirement.                       
Q.5. A, B and C were in partnership sharing profits and losses in the ratio of 3: 2: 1 respectively. On 1st January 2018, B retired from the firm. On that date their Balance Sheet was as follows:
Balance Sheet as on 1. 1. 2018
Liabilities
Rs.
Assets
Rs.
Trade Creditors
Profit and loss account
Capital: 
A            30,000
B            20,000
C            20,000
20,000
7,000



70,000
Cash
Debtors
Stock
Land & Building
Accumulated losses
9,400
16,000
23,000
46,000
2,600

97,000

97,000
The terms were:
a)      Land & Building are to the appreciated by Rs. 14,000
b)      Provision for doubtful debts is to be made at 5% on the debtors.
c)      The goodwill of the firm is to be valued at Rs. 36,000 and B’s share of the same is to be adjusted to the Accounts of A and C.
d)      Rs. 6,000 is to be paid to B immediately and the balance of his capital account is to be transferred to his Loan Account.
Pass journal entries to record the necessary adjustments for retirement of B and prepare the Balance Sheet of the firm after the retirement of B.
Q.6. A, B and C were partnership sharing Profits and Losses in the proportion of 3: 2: 1. Respectively. On 1st January, 2018. B retired from the firm. On that date, their Balance Sheet was as follows: [H.S.’ 99]
Liabilities
Rs.
Assets
Rs.
Trade Creditors
Workmen Compensation fund
Capitals :
    A = 30,000
    B = 20,000
    C = 20,000
20,000
7,000



70,000
Cash
Debtors
Stock
Land & Building
Profit & Loss A/c
9,400
16,000
23,200
46,000
2,400

97,000

97,000
The terms were:
a)      Land and Buildings are to be appreciated by Rs. 14,000.
b)      Provision for doubtful debts to be made at 5% on Debtors.
c)      The goodwill of the firm to be valued at Rs. 36,000 and B’s share of the same be adjusted into the accounts of A and C.
d)      Workmen compensation liability Rs. 1,000.
e)      Rs. 6,000 to be paid to B immediately and the balance in his capital account to be transferred to his loan account.
Pass Journal entries to record the necessary adjustments for retirement of B and prepare the Balance Sheet of the form after the retirement of B.
Q.7. Ram, Jadu and Madhu were in partnership sharing profits and losses in the ratio 3:2:1. On 1.1.2006, Jadu retired from the firm. On that date the Balance Sheet of the firm was as follows: [H.S’ 08]
Liabilities
Amount
Assets
Amount
Sundry Creditors
Reserve
Bills Payable
Capitals :
Ram =  20,000
Jadu =  15,000
Madhu = 12,000
5,000
6,000
2,600



47,000
Cash in hand
Debtors              15,000
Less : Provision   1.500
Stock
Furniture
Building
600

13,500
18,500
8,000
20,000

60,000

60,000
The terms of retirement were:
a)      Goodwill is to be valued at Rs. 12,000.
b)      Building is to be appreciated by Rs. 5,000.
c)      Provision for bad debts to be increased by Rs. 400.
d)      Furniture to be depreciated by Rs. 1,000
e)      Capital of the new firm is fixed at Rs. 60,000 in their respective capital ratio.
f)       Jadu’s capital account is to be transferred to his Loan account.
Pass the necessary Journal entries in the books of the firm; also prepare the Balance Sheet of the firm after Jadu’s retirement.
Q.8. X, Y and Z were partners in a firm sharing profits in 5: 3: 2 ratios. On 31st March, 2011. Z retired from the firm. On the date of Z’s retirement, the Balance Sheet of the firm was as follows:            [H.S.’ 12]
Liabilities
Rs.
Assets
Rs.
Creditors
Bills Payable
Outstanding rent
Provision for legal claims
Capital A/c :
X = 1,27,000
Y =    90,000
Z =    71,000
27,000
13,000
22,500




2,88,000
Bank
Debtors                                      20,000
Less : Reserve                                 500
Stock
Furniture
Land & Building
80,000

19,500
21,000
87,500
2,00,000

4,08,000

4,08,000
On Z’s retirement it was agreed that:
a)      Land & building will be appreciated by 5% and furniture will be depreciated by 20%.
b)      Provision for Doubtful debts will be made at 5% on Debtors and provision for legal claim will be made Rs. 60,000.
c)      Goodwill of the firm was valued Rs. 60,000.
d)      Rs. 70,000 from Z’s capital account will be transferred to his loan account and the balance will be paid to him by cheque
e)      Capital of the new firm is fixed at Rs. 2, 00,000.
            Prepare the Revaluation Account. Partner’s Capital Account and Balance Sheet of X and Y after Z’s retirement.    

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