Wednesday, January 23, 2019

AHSEC Accountancy Question Bank: Death of a Partner


Death of a Partner
Ascertainment of Profit of Deceased Partner
1. Ram, Manohar and Joshi were partners in a firm. Joshi died on 28th February, 2011. His share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed years of profits before death. Profits for 2008, 2009 and 2010 were Rs. 7,000, Rs. 8,000 and Rs. 9,000 respectively. Calculate Joshi’s share of profit till his death.
2. A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. B died on 31st March, 2011. For the year 2011, proportionate profit of 2010 is to be taken into consideration. For 2010, a bad debt of Rs. 2,000 has to be adjusted. The profit for 2010 was Rs. 14,000 before adjustment of bad debts. Calculate B’s share of profit till his death.
3. P, Q and R partners sharing profits and losses in the ratio of 2 : 1 : 1. It is provided in the partnership deed that in the event of retirement/death of a partner, he/his legal representatives would be paid his share of profits from the beginning of the accounting year to the date of retirement/death, which shall be taken on proportionate basis of profits of the previous year as increased by 25%.
P died on 30th June, 2011. The books accounts are closed on calendar year basis from 1st January to 31st December. The profit of the firm for the calendar year 2010 is Rs. 1,50,000. On 31st March, 2011, the firm received notice from the insurance company that the insurance premium in respect of fire insurance policy had been under-charged to the extent of Rs. 6,000 in the year 2010 and the firm has to pay immediately. You are required to calculate P’s share of profit.
4. R, S and T were partners sharing profits and losses in the proportion of ½, 1/3 and 1/6 respectively. T expired on 31st May, 2010. The partnership agreement provided that:
a)      Interest on capital to be allowed at 12% p.a.
b)      T to be credited with salary of Rs. 18,000 p.a.
c)       On the death of any of partners, his hier will receive in addition to the balance of Capital Account:
Ø  Salary and interest on capital.
Ø  Share of proportionate profit from last Balance Sheet to the date of death based on annual average profits of last 3 years (after interest on capital and salary to the partners).
d)      Partner’s capital were:  R – Rs. 3,00,000; S – Rs. 2,00,000; T – Rs. 1,00,000.
e)      Profits (before interest and salary) were:  2009-2010 – Rs. 1,24,000; 2008-2009 – Rs. 1,20,000; 2007-2008 – Rs. 80,000; and 2006-2007 – Rs. 1,30,000.
f)       There is no change in capital since 31.3.2008
You are required to calculate T’s share of profit.
1. A, B and C are partners in a firm sharing profits and losses in the ratio of 3:2:1. On 31.3.2012 their Balance Sheet was as follows:
Liabilities
Rs.
Assets
Rs.
Capital Accounts:
A                        75,000
B                        70,000
C                        50,000
Sundry Creditors
General Reserve



1,95,000
22,000
24,000
Buildings
Machinery
Patents
Stock and Debtors
Cash at Bank
75,000
36,000
15,000
45,000
70,000

2,41,000

2,41,000
C died on May 31st 2012. It was agreed that:
a)      Goodwill was valued at 3 years’ purchase of the average profits of the last five years, which were 2007-08: Rs. 40,000; 2008-09: Rs. 40,000; 2009-10: Rs. 30,000; 2010-11: Rs. 40,000 and 2011-12: Rs. 50,000.
b)      Machinery was valued at Rs. 70,000, Patents at Rs. 20,000 and Buildings at Rs. 66,000.
c)       For the purpose of calculating C’s share of profits till the date, it was agreed that the same be calculated on the basis the average profits for the last 2 years.
d)      The executors of the deceased partner is to be paid the entire amount due by means of a cheque
Prepare C’s Capital A/c to be rendered to the executor and also a journal entry for the settlement of the amount due to C’s executors.
2. The following is the Balance Sheet of Ram, Mohan and Sohan as on 31st December 2011.
Liabilities
Rs.
Assets
Rs.
Creditors
Reserve Fund
Capital Accounts:
A                    1,00,000
B                        50,000
C                        50,000
30,000
32,000



2,00,000
Furniture
Stock and Debtors
Cash at Bank
Cash in Hand
Profit and Loss Account
90,000
1,20,000
40,000
2,000
10,000

2,62,000

2,62,000
B died on 31st March 2012. Under the partnership agreement the executor of B was entitled to:
a)      Amount of standing to the credit of his Capital Account.
b)      Interest on Capital which amounted to Rs. 625.
c)       His share of goodwill Rs. 35,000.
d)      His share of profit from the closing of the last financial year to the date of death which amounted to Rs. 4,375.
B’s executor was paid Rs. 18,000 on 1st April 2012 and the balance was to be paid in four equal yearly installments starting from 31.3.2013 with interest @ 6%. Pass necessary journal entries and draw up B’s Account to be rendered to his executors and B’s Executor’s Account till it is finally paid.
3. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5:3:2. On 31.3.2010 their Balance Sheet was as follows:
Liabilities
Rs.
Assets
Rs.
Capital Accounts:
X                        75,000
Y                        62,500
Z                        57,500
Sundry Creditors



1,75,000
32,000
Buildings
Machinery
Patents
Stock and Debtors
Cash at Bank
50,000
75,000
15,000
57,500
20,000

2,07,500

2,07,500
Z died on 31.7.2010, it was agreed that:
a)      Goodwill is valued at 2 ½ year’s purchase of the average profits of the last four years, which were as follows:
Years
Profits (Rs.)
2006-2007
2007-2008
2008-2009
2009-2010
32,500
30,000
40,000
37,500
b)      Machinery be valued at Rs. 70,000; Patents at Rs. 20,000 and Buildings at Rs. 62,500.
c)       For the purpose of calculating Z’s share of profits in the year of his death, the profits in 2010-2011 should be taken to have been accrued on the same scale as in 2009-2010.
d)      A sum of Rs. 17,500 was paid immediately to the executors of Z and the balance was paid in four half yearly installments together with interest at 12% p.a. starting from 31.1.2011.
Give necessary journal entries to record the above transactions and Z’s executor’s account till the payment of installment due on 31.1.2011.
4. A, B and C carried on business in partnership. Profit being divisible in the ratio of 3:2:1. The books of 31st December 2011 showed their capitals to be Rs. 5,200, Rs. 2,500 and Rs. 1,500. On 28th Feb’ 2012, A died and you are instructed to prepare an account for presentation to his legal representatives having regarded the following facts:
a)      The firm has insured the partners’ lives severally. A’s for Rs. 4,500; B’s for Rs. 2,400 and C’s for Rs. 1,200. Premiums were charged to P/L A/c. The surrender value of each policy on 28th Feb’ 2012 amounted in each case to 1/4th of the sum assured.
b)      Capital carried interest at 5% p.a.
c)       A’s drawings from 01.01.2012 to the date of his death amounted to Rs. 600.
d)      A’s share of profits for portion of the current financial year for which he lived was to be taken at a sum calculated on the average of the three years’ profits. Goodwill is to be valued at 2 years’ purchase of the average profits of the last three years. The annual profits for last 3 years’ were Rs. 1,450, Rs. 3,700 and Rs. 4,300 respectively. Show the account of the executors of A and journalize the entries effecting it.
5. A, B and C are in a partnership sharing profits and losses in the proportion of 6:5:4. They take out a Joint Life Assurance Policy for Rs. 2,00,000. The annual premium on the policy is Rs. 7,500 and this is treated as a business expenses. Accounts are closed annually on 31st Dec. The partnership Deed provides that the representatives of a deceased partner are entitled to:
1)      The deceased partner’s capital appearing in the last Balance Sheet.
2)      Interest on capital @ 6% p.a. to the date of his death.
3)      His share of profits be calculated till the date of his death on the average of the last three years’ profits and
4)      Share of Goodwill be calculated at 2 years purchase of the average of the last three years profit.
B died on 1.4.2012. His drawings in 2012 up to his death amounted to Rs. 3,000. His capital shown in the 2011 Balance Sheet was Rs. 80,000.
The profits for the year 2009, 2010 and 2011 amounted to Rs. 65,000, Rs. 64,000 and Rs. 69,000 respectively. Draw up B’s Account to show the amount due to his estate from the firm.

No comments:

Post a Comment

Kindly give your valuable feedback to improve this website.

Popular Posts for the Day