A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1. From 1st April, 2023 they decided to share future profits and losses equally.
A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1. From 1st April, 2023 they decided to share future profits and losses equally.
Following balances appeared in their books:
It was agreed that:
(i) Goodwill should be valued at two year’s purchase of super profits. Firm’s average profits are ₹ 75,000. Capital invested in the business is ₹ 6,00,000 and normal rate of return is 10%.
(ii) Furniture (book value of ₹ 50,000) be reduced to ₹ 30,000.
(iii) Computers (book value of ₹ 40,000) be reduced by ₹ 10,000.
(iv) Claim on account of Workmen’s Compensation amounted to ₹ 50,000.
(v) Investments (book value of ₹ 30,000) were revalued at ₹ 25,000.
Pass necessary journal entries for the above.
[Ans. Adjustment for Goodwill : Dr. C by ₹ 4,000 and Cr. A and B by ₹ 2,000 each; Revaluation Loss ₹ 35,000.]
| Profit and Loss a/c (Cr.) | 20,000 |
| Advertisement Suspense A/c (Dr.) | 15,000 |
| Workmen Compensation Reserve | 60,000 |
Anurag Pathak Answered question August 2, 2024
