ici Cake and Muffin are partners sharing

Anril, 2016, they admit profits and losses in the ratio of

Cookie as a new
partner for 1/6th share
5:4.On 1st
firmand the new ratio agreed upon is 3:2:1. in the profits of the
Goodwill, at the time of Cookie's admission is to be valued
capitalisation of the the basis of
on
average profits of the last three years. Profits for the last three
years were:
Year ended 3 1st March, 2014
39,000 (including an abnormal loss of
79,000).
Year ended 3 1st March, 2015 783,000 (including an abnormal
gain of T8,000).
Year ended 31st March, 2016 72,000.
On Ist April, 2016, the firm had assets of
T8,00,000. Its creditors amounted to
3,60,000. The firm had a Reserve Fund of T40,000 while Partners' Capital Accounts
showed abalance of R4,00,000.
The normal rate of return expected from this class of business is 13%.
Cookie brings in 2,00,000 for her capital but is unable to bring in cash for her
share of goodwill.
You are required to:
(0) Calculate Cookie's share of Goodwill in the firm (Show your workings
clearly)
) Pass Journal entries at the time of Cookie's admission.
ISC Sample Paper 2017)
 A, Band Cwere in partnership sharing profits and losses in the ratio of 7:3:2
On Ist April, 2015, they admit D into partnership on the following terms:
(1) D to bring in 1,00,000 as capital.
 (2) Goodwill to be valued at 80% of the average annual profits of the previous
three or four years whichever is higher. D will bring in his share of goodwill
in cash.

(3) The profits of the past years were:

Year ended 31st March
2012 93,000
2013 68,000
2014 1,00,000
2015 75,000
(4) The new profit sharing ratio will be 4:3:3:2.
(5) The new partner is entitled to a salary of R500 per month. B personally
guaranteed that the aggregate of salary and share of profit of the new partner
shall not be less than F40,000 per annum.
Profits for the year ended 31st March 2016 amounted to 1,95,000 before
charging D's salary.
Pass necessary entries at the time of admission of the new partner and show the
distribution of profits for the year ended 31st March, 2016.
ILLUSTRATION S3.
Quick and Slow are partners in a firm sharing profits and losses in the ratio ot
of
3:2. The Balance Sheet of the firm as at 31st March, 2018 was as under
Liabilities Assets
Capital Accounts Furniture & Fixtures
Office Equipments
60,000
Quick 1,20,000 30,000
Slow 77,000 1,97,000 Motor Car
75.000
General Reserve 30,000 Stock 50,000
Sundry Creditors 96,000 Sundry Debtors 90,000
Cash at Bank 18,000
3,23,000 3.23,000
Smooth was admitted as a new partner with effect from Ist April, 2018 and it was
agreed that he would bring some private furniture worth F10,000 and private stockk
costing 78,000 and in addition contribute 750,000 cash towards capital.
He would also bring proportionate share of goodwill which is to be valued at two
year's purchase of the average profits of the last three years.
The profits of the last three years were

2017-18 52.000
2016-17 32,000
2015-16 28,000
However, on a checking of the past records, it was noticed that on 1.4.2016 some
new furniture costing 78,000 was purchased but wrongly debited to revenue and in
2017-18 a purchase invoice for F4,000 dated 25.3.2018 has been omitted in the books
The firm charges depreciation on furniture 10% p.a. on written down value.
Your calculation of goodwill is to be made on the basis of correct protits.
On revaluation, value of stock is to be reduced by 5% and Motor car is wort
785,000.
Smooth duly paid the required amount for goodwill and cash towards capital.
It was decided that the future profits of the firm would be shared as Quick 50|
Slow 30% and Smooth 20%.
AD
Assuming the above mentioned arrangements were duly camed out, how h e
hofit&LosAdjustment Account, Capital Accounts of the partners and the Balance
Sheet of the firm after
Smooth's admission.
 Doenika and Rajshree are
parthers in a
DOn 31st March, 2018, their Balancefirm sharing profits and losses
On 31,
in the ratio
of3:2. Sheet was as
Liabilities under
Sundry Creditors Assets
16,000 Cash in Hand
Public Deposits
Bank Overdraft
61,000 Cash at Bank 1,200
Outstanding Liabilities
6,000 Stock 2,800
2,000 Prepaid Insurance 32,000
Capital Accounts 1,000
Deepika 48,000 Sundry Debtors 28,800
Less: Provision for
Rajshree 40,000 88,000 Doubtful Debts 800
Plant and Machinery 28,000
Land and Building 48,000
Furniture 50,000
10,000
1,73,000
1,73,000
On Ist April, 2018, the
partners decide to admit Anshu as
following terms a
partner on the
(i) The new profit-sharing ratio of Deepika, Rajshree and Anshu will be 5:3: 2,
respectively.
(i) Anshu shall bring 732,000 as his
capital.
(ii) Anshu is unable to bring in any cash for his share of
therefore, decide to calculate goodwill on the basis goodwill. Partners,
of Anshu's share in the
profits and the capital contribution made by him to the firm.
() Plant and
Machinery would be increased by T12,000.
() Stock would be
increased to 740,000.
Provision for Doubtful Debts is to be maintained at
T4,000. Value of
appreciated by 20%. Furniture has depreciated by 10%.Land
and
Building has
There is an additional liability of T8,000 being outstanding salary payable to
Cmployees of the firm. This liability is not included in the
abilities, stated in the above Balance Sheet. Partners decide tooutstanding
show this
ldbility in the books of accounts of the
reconstituted new firm.
repare Revalu:
Dre Revaluation Account, Partners' Capital Accounts and the Balance Sheet
Deepika, Rajshree and Anshu.
 A and B are partners and the profit is divided as follows to A: to B and
6
carried to a Reserve Account. They admit C as a partner on Ist April, 2018 at which
date the Balance Sheet of the firm was as under
Liabilities Assets

Creditors 1,60,000 Cash at Bank 20,000

Outstanding Expenses 12,000 Debtors 2,20,000
Reserve 90,000 Stock 1,80,000
Capital A/cs Plant and Machinery 1,50,000
3,18,000 Buildings 2,00,000
B 2,00,000 5,18,000 Advertisement Expenditure 10,000
7,80,000 7,80,000
Following terms were agreed upon:
() Stock is undervalued by 10%.
(i) Depreciation of T30,000 had been omitted on plant and machinery for the
year ended 31st March, 2018.
(ii) Creditors include a Contingent liability of T50,000 which has been decided by
the Court at 743,000.
(iv) In respect of debtors, the following debts proved bad or doubtful
15,000 due from Ram- bad to the full extent;
20,000 due from Shyam- insolvent, estate expected to pay only 40%.
his
(v) Goodwill of the firm is valued at 760,000. However, C is unable bring
to

share of goodwill in Cash.

 (oi) Cis giventh share of profits which he acquires equally from A and B. Cis to
bring in Capital proportionate to his share of profits in the firm.
ou are required to prepare Revaluation Account, Capital Accounts and the new
Balance Sheet of the firm.
I L L U J I

The following is
balance sheet the
of A. B
proporti of :5:3 respectively and C
C shari
sharing
ng profits and losses in
Liabilities
Assets
Creditors

Bills Payable
18,900 Cash
6,300 Debtors 1,890
General Reserve
10,500 Stock 26,460
Capitals Furniture 29,400
A 35,400 Land & Building 7,350
B 29,850 45,150
Goodwill
14,550 79,800 5,250
1,15,500
1,15,500
Thev agreed to take D into partnership and give him 1/8th share on the following
terms
(1) That Furniture be depreciated by 2,920.
(2) An Old Customer, whose account was written off as bad, has
2,000 in full settlement of his full debt.
promised to pay
(3) That a provision of F1,320 be made for outstanding repair bills.
4) That the value of land and building having appreciated be brought upto
756,910
(5) That D should bring in 14,700 as his capital.
(6) That D should bring in F14,070 as his share of goodwill.
accounts of old partners
Ihat after making the above adjustments, the capital
the basis of the proportion of D's Capital to his share in
Cadjusted on
as the
in by the old partners,
i.e., actual cash to be paid offor brought
iness
case may be.
firm.
balance sheet of the new
Pass necessary
the journal entries and prepare the