Question
In: Accounting
Partners A, B and C running a partnership firm in the name of M/s. ABC LLC...
Partners A, B and C running a partnership firm in the name of M/s. ABC LLC with their capitals of OMR 60,000, OMR 40,000 and OMR 30,000 and an agreed sharing the profits and losses in the ratio of 3:2:1.respectively on 31.3.2020. The firm’s various assets and liabilities in the books of accounts are –
|
Particular |
OMR |
Particular |
OMR |
|
Plant |
60,000 |
Bank Overdraft |
25,000 |
|
Buildings |
100,000 |
Sundry Creditors |
100,000 |
|
Furniture |
25,000 |
Premises |
40,000 |
|
Land |
70,000 |
Machinery |
40,000 |
|
6% Bonds |
50,000 |
Stock |
25,000 |
|
Bank Loan |
40,000 |
Sundry Debtors |
70,000 |
|
Profit & Loss A/c |
25,000 |
Bills Receivable |
25,000 |
|
General Reserve |
50,000 |
Bills Payable |
80,000 |
On 1.4.2020 they decided to admit D into the partnership for
1/5th of the future profits with the terms that D shall bring in a
capital of OMR 50,000. The Goodwill of the firm being valued at OMR
40,000, Machinery, Land, Buildings and Plant are to be appreciated
by 10%. Provision for Doubtful Debts @ 5% is to be created against
Debtors. Stock, Furniture, Premises are to be depreciated by 5%.
Discount on Creditors is to be made against Creditors @ 2.5%.
Provision for outstanding liability is to be created at OMR 4,000
and Bank Loan is to be maintained in the books.
Q1. Journalize the above transactions with narrations and prepare
the Revaluation Account. Give your comment with reasons about the
values which are debited and credited in the Revaluation
Account.
Q2. Prepare Partners’ Capital Accounts and Balance Sheet of the reconstituted partnership firm. Give your views about the changes in the balance sheet after reconstitution.
Solutions
Expert Solution
| 1) | |||
| Revaluation A/c | |||
| Particulars | Debit amount | Particulars | Credit amount |
| Prov for doubtful debts | 3,500 | Machinery | 4,000 |
| Stock | 1,250 | Land | 7,000 |
| Furniture | 1,250 | Building | 10,000 |
| Premises | 2,000 | Plant | 6,000 |
| Provision for Liability | 4,000 | Discount on creditors | 2,500 |
| Revaluation Profit | 17,500 | ||
| Total | 29,500 | Total | 29,500 |
| 2) | |||||||||
| Partner's Capital A/c | |||||||||
| Debit amount | Credit amount | ||||||||
| Particulars | A | B | C | D | Particulars | A | B | C | D |
| Bal b/d | 60,000 | 40,000 | 30,000 | ||||||
| Revaluation Profit | 8,750 | 5,833 | 2,917 | ||||||
| Goodwill premium | 4,000 | 2,667 | 1,333 | ||||||
| Profit & Loss A/c | 12,500 | 8,333 | 4,167 | ||||||
| General reserve | 25,000 | 16,667 | 8,333 | ||||||
| Bank | 50,000 | ||||||||
| Bal c/d | 1,10,250 | 73,500 | 46,750 | 50,000 | |||||
| Total | 1,10,250 | 73,500 | 46,750 | 50,000 | Total | 1,10,250 | 73,500 | 46,750 | 50,000 |
| Balance sheet | |||
| Liabilities | amount | Assets | amount |
| Capital A/c | Machinery | 44,000 | |
| A | 1,10,250 | Land | 77,000 |
| B | 73,500 | Building | 1,10,000 |
| C | 46,750 | Plant | 66,000 |
| D | 50,000 | Stock | 23,750 |
| Furniture | 23,750 | ||
| Provision for Liability | 4,000 | Premises | 38,000 |
| 6% Bonds | 50,000 | Bank | 33,000 |
| Bank Loan | 40,000 | Sundry debtors | 70,000 |
| Bank o/d | - | Prov for doubtful debts | -3,500 |
| Sundry creditors | 97,500 | Bills receivables | 25,000 |
| Bills payables | 80,000 | other asset | 45,000 |
| (difference in data provided) | |||
| Total | 5,52,000 | Total |
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