Question

Following information use in Question NO.6

The following is the information about assets and liabilities of M/s. Hanish LLC and its partners A, B and C. They are sharing profits 9:6:3 with total capital of OMR 169,000 as on 31.3.2020.

Particular	OMR	Particular	OMR
Cash	58,500	Bank Loan	52,000
Sundry Debtors	91,000	Bonds	65,000
Stock	32,500	Bills Payable	104,000
Machinery	52,000	Sundry Creditors	130,000
Land	91,000	Bank Overdraft	32,500
Furniture	32,500	Plant	78,000
Premises	52,000	Profit & Loss A/C	32,500
Building	130,000	Bill Receivable	32,500

The capital contributed by the partners is OMR 78,000, OMR 52,000, and OMR 39,000 respectively. The firm accumulated its past profits in the name General Reserve is OMR 65,000. On 1.4.2020 they decided to admit D into the partnership for 1/5^th of the future profits with the terms that D shall bring in a capital of OMR 65,000.

Goodwill of the firm is being valued at OMR 52,000. The assets like Machinery, Land, Buildings and Plant are to be appreciated by 10% and Stock, Furniture, Premises are to be depreciated by 5%.

The Provision for Doubtful Debts against Sundry Debtors is to be made @ 5%. Discount on Creditors @ 2.5% received from Sundry Creditors. The Provision for outstanding liability is to be created at OMR 5,200 and Bank Loan is to be maintained

Q6.

Prepare Partners’ Capital Accounts and Balance Sheet of the reconstituted partnership firm.

Give your views about the changes in the balance sheet after reconstitution.    (2+2+1 = 5 Marks)

Answer 1

Revaluation Account workings:
Particulars	Amount before reconstitution	Change to be made	Calculation	Amount of Change	Debit/(Credit) to Revaluation A/c	Amount after reconstitution
Machinery	52,000	Appreciate by 10%	+52000 x 10%	5,200	Increase in value of asset, so Credit to Revaluation Account	57,200
Land	91,000	Appreciate by 10%	+91000 x 10%	9,100	Increase in value of asset, so Credit to Revaluation Account	1,00,100
Buildings	1,30,000	Appreciate by 10%	+130000 x 10%	13,000	Increase in value of asset, so Credit to Revaluation Account	1,43,000
Plant	78,000	Appreciate by 10%	+78000 x 10%	7,800	Increase in value of asset, so Credit to Revaluation Account	85,800
Stock	32,500	Depreciate by 5%	-32500 x 5%	(1,625)	Decrase in value of asset, so Debit to Revaluation Account	30,875
Furniture	32,500	Depreciate by 5%	-32500 x 5%	(1,625)	Decrase in value of asset, so Debit to Revaluation Account	30,875
Premises	52,000	Depreciate by 5%	-52000 x 5%	(2,600)	Decrase in value of asset, so Debit to Revaluation Account	49,400
Sundry Debtors(Provision for Doubtful Debts to be created)	91,000	Create at 5% of Sundry Debtors balance	-91000 x 5%	(4,550)	Decrase in value of asset, so Debit to Revaluation Account	86,450
Sundry Creditors (Discount to be provided)	1,30,000	Create at 2.5% of Sundry Creditors balance	130000 x 2.5%	3,250	Decrease in value of liability, so Credit to Revaluation Account	1,33,250
Provision for outstanding liability	-	Provide OMR 5,200	-5200	(5,200)	Increase in value of liability, so Debit to Revaluation Account	-5,200
Profit / (Loss) on revaluation [Net effect of all the revaluations]	22,750
The above profit on revaluation is to be distributed among the old partners in the old profit sharing ratio i.e.,
A's share in Revaluation profit	=22750 x 3/6	11,375	Debit Revaluation Accout and Credit A's Capital Account
B's share in Revaluation profit	=22750 x 2/6	7,583	Debit Revaluation Accout and Credit B's Capital Account
C's share in Revaluation profit	=22750 x 1/6	3,792	Debit Revaluation Accout and Credit C's Capital Account

In the books of M/s. Hanish LLC
Revaluation Account
Particulars	OMR	Particulars	OMR
To Stock Account	1,625	By Machinery Account	5,200
To Furniture Account	1,625	By Land Account	9,100
To Premises Account	2,600	By Buildings Account	13,000
To Provision for Doubtful Debts Account	4,550	By Plant Account	7,800
To Provision for Outstanding Liability account	5,200	By Discount for Sundry Creditors Account	3,250
To Profit on Revaluation
A's Capital Account	11,375
B's Capital Account	7,583
C's Capital Account	3,792
	38,350		38,350