ACCOUNTANCY TEST (DEATH & DISSOLUTION)

Question 1: Ajay, Bhawna and Shreya were partners sharing profits in the ratio of 2:2:1. On 1st
July, 2021 Shreya died. The books of accounts are closed on 31st March every year. Sales for the
year 2020-21 ` 5,00,000 and that from 1st April to 30th June, 2021 were ` 1,40,000. Rate of
profit during the past three years had been 10% on sales. Since Shreya’s legal representative was
her only son, who is specially abled, it was decided that the profit for the purpose of settling
Shreya’s account is to be calculated as 20% on sales.
Calculate Shreya’s share of profits till the date of her death and pass necessary Journal entry for
the same.

Question 2: On 31st March, 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were
partners in a firm was as under:

 ( Amou  ( Amou
Liabilities nt`) Assets nt`)
Sundry Creditors 2,50,000 Building 2,60,000
Reserve Fund 2,00,000 Investment 1,10,000
Capital 1,50,0 Qureshi's
A/cs: Pooja 00   Loan 1,00,000
                     Qur 1,00,0
eshi 00   Debtors 1,50,000
                     Ros 1,00,0
s 00 3,50,000 Stock 1,20,000
      Cash 60,000
  8,00,000   8,00,000
       
  
Qureshi  died on 1st July, 2014. The profit-sharing ratio of the partners was 2 : 1 : 1. On the death
of a partner, the partnership deed provided for the following:
(i) His share in the profits of the firm till the date of his death will be calculated on the basis of
average profits of last three completed years.
(ii) Goodwill of the firm will be calculated on the basis of total profit of last two years.
(iii) Interest on loan given by the firm to a partner will be charged at the rate of 6% p.a.
or  ` 4,000, whichever is more.
(iv) Profits for the last three years were  ` 45,000;  ` 48,000 and  ` 33,000.
Prepare Qureshi's Capital Account to be rendered to his executors.

Question3: Pass the Journal entries for the following transactions on the dissolution of the firm
of P and Q after various assets (other than cash) and outside liabilities have been transferred
to Realisation Account:
(a) Stock  ` 2,00,000. 'P' took over 50% of stock at a discount of 10%. Remaining stock was sold
at a profit of 25% on cost.
(b) Debtor `  ` 2,25,000. Provision for Doubtful Debts  ` 25,000.  ` 20,000 of the book debts
proved bad.
(c) Land and Building (Book value  ` 12,50,000) sold for  ` 15,00,000 through a broker who
charged 2% commission.
(d) Machinery (Book value  ` 6,00,000) was handed over to a creditor at a discount of 10%.
(e) Investment (Book value  ` 60,000) realised at 125%.
(f) Goodwill of  ` 75,000 and prepaid fire insurance of  ` 10,000.
(g) Trade Creditors   ` 1,60,000. Half of the trade Creditors accepted Plant and Machinery at an
agreed valuation of  ` 54,000 and cash in full settlement of their claims after allowing a discount
of  ` 16,000. Remaining trade Creditors were paid 90% in final settlement.
 
Question 4:Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on
1st April, 2022. Naresh was assigned the responsibility to realise the assets and pay the liabilities
at a remuneration of  `10,000 including expenses. Balance Sheet of the firm as on that date was
as follows:
 Amoun  Amoun
Liabilities t Assets t
Creditors 40,000 Cash/Bank 6,000
Bills Payable 40,000 Investments 30,000
40,00
Naresh's Loan 44,000 Debtor 0  
Less: Provision for
M `. Yogesh's Loan 42,000 Doubtful Debts 4,000 36,000
Investment Fluctuation
Reserve   8,000 Bills Receivable 33,400
Capital A/cs:     Profit and Loss A/c 1,10,600
21,00
Yogesh 0      
21,00
Naresh 0 42,000    
         
  2,16,000   2,16,000
       
 
The firm was dissolved on following terms:
(a) Yogesh was to pay his wife's loan.
(b) Debtor realised `30,000.
(c) Naresh was to take investments at an agreed value of  ` 26,000.
(d) Creditors  and Bills Payable were payable after two months but were paid immediately at a
discount of 15% p.a.
(e) Bills Receivable were received allowing 5% rebate.
(f) A Debtor previously written off as Bad Debt paid `15,000.
(g) An unrecorded asset realised `10,000.
Prepare Realisation Account, Partners' Capital Accounts, Partners' Loan Account and Cash/Bank
Account.