question_answer

P, Q and R were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st December, 2016, their balance sheet stood as under: Balance Sheet as at 31st December, 2016

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Sundry Creditors		80,000	Cash	40,000
Workmen Compensation Fund		40,000	Sundry Debtors	70,000
General Reserve		60,000	Investment	50,000
Bills Payable		30,000	Stock	80,000
Capital A/cs			Machinery	1,00,000
P	1,00,000		Patents	20,000
Q	60,000		Goodwill	50,000
R	40,000	2,00,000
		4,10,000		4,10,000

Adjustments (i) P died on 1st July, 2017. (ii) Goodwill be valued at 3 years' purchase of the average profit of last 4 years, which were 2012 Rs. 40,000; 2013 Rs. 20,000 (loss); 2014 Rs. 60,000 and 2015 Rs. 84,000. (iii) For the purpose of calculating P's share in profits, profit during 2016 should be taken to have accrued on the basis of profit of 2015. (iv) P's drawings up to the date of death were Rs. 10,000. (v) Interest on drawings at 6% per annum irrespective of period. Prepare P's capital account.

Answer:

Dr                                                         P's Capital Account                                                                 Cr

Particulars	Amt (Rs.)	Particulars	Amt (Rs.)
To Goodwill A/c	25,000	By Balance b/d	1,00,000
To Drawings A/c	10,000	By General Reserve A/c	30,000
To Interest on Drawings A/c	600	By Workmen's Compensation Fund A/c	20,000
\[\left( 10,000\,\times \,6%\text{ } \right)\]		By Q's Capital A/c	36,900
To P's Executor's A/c	1,96,900	By R's Capital A/c	24,600
		By Profit and Loss Suspense A/c	21,000
	2,32,500	\[(84,000\,\times \,5/10\,\times \,6/12)\]	2,32,500

Working Note Calculation for Goodwill Average Profit \[=\frac{\text{Total}\,\text{Profit}\,\text{of}\,\text{4}\,\text{Years}}{\text{Number}\,\text{of}\,\text{Years}}\] \[=\frac{40,000\,+\,\left( 20,000 \right)\,+\,60,000\,+\,84,000}{4}\,=\,\frac{1,64,000}{4}\,=\,Rs.\,41,000\] Goodwill \[=\,\text{Average}\,\text{Profit}\,\times \,\text{Number}\,\text{of}\,\text{Years }\!\!'\!\!\text{ }\,\text{Purchase}\,=\,41,000\,\times \,3\,=\,Rs.\,1,23,000\] P's Share of Goodwill \[=\,1,23,000\times \frac{5}{10}\,=\,Rs.\,61,500\] To be contributed by Q and R in their sacrificing ratio i.e. 3 : 2. Q?s Sacrifice \[=\,61,500\times \frac{3}{5}\,=\,Rs.\,36,900;\]                     R?s Sacrifice \[\,=\,61,500\times \frac{2}{5}\,=\,Rs.\,24,600\]