profit (Ba fig)

Ram: 9,000 x = 5,400 Financra AG to aLimitedCompany

to
P a r t n e r s h i p
24.177
Sale
of Rs. Ases
Llablttes

Shyam 9,000 x =
3,600
48,000 Sundry Debtors 60,000
S u n d r yc r e d i t o r s

1,47,000 40,000 Bills Receivable

10,000
Stock
LoanC r e d i t o r

16,000 36,000
B a n ko v e r d r a f f

6,000 Patents 8,000

R e s e r v eF u n d

Note: Thou Jounal alone is asked, ledger is also Drer

CapitalA/cs
profit and hal ces payable to partners. redto ascerain reai 40,000
40,000
Machinery
Land & Buildings
16,000
60,000
Partners' Capital Accounts N

1,90,000 1,90,000

Particulars Ram Shyam Particulars

(a The goodwilleof the firm was to be valued at 2 years purchase of the
RomSt average
of the previous three years.
profits
To Equity shares of By Balance bld
Ram & Co Ltd 60,00 4 ) The loan creditor has agreed accept
to 7% redeemable preference
shares in settlement of his
claim.
A/c (3:2) 60,000 40,0 By Realisation
Ale 5,400 ( Land and Buildings and Machinery were to be valued at Rs. 1,00,000
(Profit) and Rs. 24,000 respectively.
To Bank A/c 5,400 3,600
(The Vendors were to be allotted equity shares of the value of Rs. 2,10,000.
(Bal. fig)
65,400 43,600 (e) The past working results of the firm showed that they had made profits
65,400
ofRs. 30,000 in 1983, Rs. 36,000 in 1984 and Rs. 42,000 in 1985 after
BankA/c setting aside Rs. 2,000 to reserve fund each year.
in the books of the
Particulars Rs Particu
You are required show Realisation ac and capital aes
to
firm and opening journal entries in the books of the New Company.
Bangalore, BCom, May 1986]
To Balance B/d 2,000 By Realisatior c (Transfer Solution:
To Realisation A/c 6,000 By Realisation, In the Books of S&V
To Ram& Ca. Ltd A/c 7,000 By Ram's Capital Realisation A/c
By Shyam's Capital Particulars Rs Particulars Rs

To Sundry debtors A/c 48,000

60,000 By Sundry Creditors A/c
15,000 To Bills By Loan Creditors A/c
40,000
Receivable A/c 10,000
To Stock A/c 16,000
36,000 By Bank overdraft A/c
To Patents ANe A/e 2,10,000
8,000 By New Company
To Machinery Alc (purchase conside ation)
16,000
lastration 2(With good will valuation) ToLand &Buildings
S Sheetstoodas
ahd V sharing profits and losses equally, decided to sto töl 60,000
To Partners' Capital
Into a limited company, on 31.12.85, when their Balance 1,24,000
24.178

Alcs profit (Bal. Fig) Financia Accoungina 24.179

S: 1,24,000x = Rs. 62,000| 3,14,000 Partnership
to Limited Company
eof
Total profits
V: 1,24,000xy =Rs. 62,000 Average profits No.of years

Note: It is assumed that Loan creditors are taken over by the r 1,14,000
theyare settled by the company by issuing preference shaand apany and h 3 years Rs.38,000
be assumed that the selling tirm received the preference shares.
It
share t can a x No.
of years purchase
purchase price and gave them to the loan creditors. Inthatong Value of Goodwill=Average profit
na/c is debited.se, purchasg
consideration will be Rs. 2,50,000 and realisation Rs.38,000x 2 years
alcis debited
of Loan creditors. for paymeg -Rs. 76,000
Partner's Capital Accounts Journal Entries

Particulars S V Particulars s Dde

Particulars LA Dr. Cr.
Rs
To Equity shares of 1,05,000 1,05,000 ByBalancebd 40,000
New Company By Reserve Fund
3,000
40,09 Business purchase A/c Dr 2,10,000
2,10,000(1:1) Alc 6,000 (1:1) 31.12.85
To S and V Alc
By Revaluation 2,10,000
62,000 62,0 (Being purchase price payable to
Alc (profit)
the vendors)
31.12.85 Goodwill Ac Dr 76,000
1,05,000 1,05,000
1,05,000 105.0 (as calculated)
Land & Buildings A/e Dr 1,00,000
Machinery Alc Dr 24,000
Note: Shares are distributed to the partners equally. In this
ratio and final claim ratio are one and the same.
problemprofit shuriq| Patents A/c Dr 8,000
31.12.85 Stock A/c Dr 36,000
In the Books of New Company
Bills Receivable A/c Dr 10,000
Working Note : Computation of Value of Goodwill
Sundry debtors A/c Dr 60,000
To Sundry creditors A/c
48,000
Rs. To Loan creditors A/c 40,000
Total profits : 1983: 30,000 To Bank overdraft A/c
16,000
1984 36,000 To Business purchase A/c
2,10,000
1985 42,000 (Being assets and liabilities of
S&V taken over)
31.12.85 S&V A/c Dr
1,08,000 2,10,000
To Equity Share capital Alc
Add: Amount set aside 2,10,000
6,000 (Being payment of purchase
for Reserve (2,000 x
3 31.12.85
price in equity shares)
Loan Creditor's A/c Dr 40,000
Total profits 1,14,000 To 7% Redeemable 40,000
24.180
preference share capital A/c Financial Accoumt
(Being allotment of
redeemable preference shares to
loan creditors to settle their
claim)