A and B share profits in the proportions of 34 and 14. Their balance

1.	A and B share profits in the proportions of 34 and 14. Their balance sheet on Dec 31, 2016 was as follows. Balance Sheet of A and B as on December 31, 2006 Capital and LiabilitiesAmt. (Rs)AssetsAmt. (Rs)Sundry Creditors41,500Cash at Bank26,500Reserve Fund4,000Bills receivable3,000Capital AccountsDebtors16,000A30,000Stock20,000B16,000Fixtures1,000Land and Building25,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯91,500––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯91,500–––––––– On Jan 1, 2007, C was admitted into partnership on the following terms (a) That C pays Rs. 10.000 as his capital. (b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B. (c) That stock and fixtures be reduced, by 10% and 5%, provision for doubtful debts be created on sundry debtors and bills receivable. (d) That the value of land and building be appreciated by 20%. (e) There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created. (f) An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence, should be written back. Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new balance sheet on the admission of C.
Answer» A and B share profits in the proportions of $\frac{3}{4}$ and $\frac{1}{4}$ . Their balance sheet on Dec 31, 2016 was as follows. $Balance Sheet of A and B$ $as on December 31, 2006$ $\begin{matrix} Capital and Liabilities & Amt. (Rs) & Assets & Amt. (Rs) Sundry Creditors & 41, 500 & Cash at Bank & 26, 500 Reserve Fund & 4, 000 & Bills receivable & 3, 000 Capital Accounts & Debtors & 16, 000 A & 30, 000 & Stock & 20, 000 B & 16, 000 & Fixtures & 1, 000 Land and Building & 25, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 91, 500 - ------ - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 91, 500 - ------ - \end{matrix}$ On Jan 1, 2007, C was admitted into partnership on the following terms (a) That C pays Rs. 10.000 as his capital. (b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B. (c) That stock and fixtures be reduced, by 10% and 5%, provision for doubtful debts be created on sundry debtors and bills receivable. (d) That the value of land and building be appreciated by 20%. (e) There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created. (f) An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence, should be written back. Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new balance sheet on the admission of C.

A and B share profits in the proportions of 34 and 14. Their balance sheet on Dec 31, 2016 was as follows. Balance Sheet of A and B as on December 31, 2006 Capital and LiabilitiesAmt. (Rs)AssetsAmt. (Rs)Sundry Creditors41,500Cash at Bank26,500Reserve Fund4,000Bills receivable3,000Capital AccountsDebtors16,000A30,000Stock20,000B16,000Fixtures1,000Land and Building25,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯91,500––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯91,500–––––––– On Jan 1, 2007, C was admitted into partnership on the following terms (a) That C pays Rs. 10.000 as his capital. (b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B. (c) That stock and fixtures be reduced, by 10% and 5%, provision for doubtful debts be created on sundry debtors and bills receivable. (d) That the value of land and building be appreciated by 20%. (e) There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created. (f) An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence, should be written back. Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new balance sheet on the admission of C.

Answer»

A and B share profits in the proportions of $\frac{3}{4}$ and $\frac{1}{4}$ . Their balance sheet on Dec 31, 2016 was as follows.

$Balance Sheet of A and B$
$as on December 31, 2006$
$\begin{matrix} Capital and Liabilities & Amt. (Rs) & Assets & Amt. (Rs) Sundry Creditors & 41, 500 & Cash at Bank & 26, 500 Reserve Fund & 4, 000 & Bills receivable & 3, 000 Capital Accounts & Debtors & 16, 000 A & 30, 000 & Stock & 20, 000 B & 16, 000 & Fixtures & 1, 000 Land and Building & 25, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 91, 500 - ------ - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 91, 500 - ------ - \end{matrix}$

On Jan 1, 2007, C was admitted into partnership on the following terms

(a) That C pays Rs. 10.000 as his capital.

(b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.

(c) That stock and fixtures be reduced, by 10% and 5%, provision for doubtful debts be created on sundry debtors and bills receivable.

(d) That the value of land and building be appreciated by 20%.

(e) There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created.

(f) An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence, should be written back.

Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new balance sheet on the admission of C.

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