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CH 4 Worksheet

This document contains 5 questions related to changes in partnership profit/loss sharing ratios and the accounting entries required to record the effects of these changes. The questions cover topics such as calculating the impact on individual partner's capital due to a ratio change, adjusting goodwill through partner's capital accounts or raising/writing it off, valuing and recording goodwill when the ratio changes, distributing an investment fluctuation reserve when ratios change, and making various revaluations/adjustments to accounts when ratios change along with other partnership terms.

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HIMANSHU NAGAR
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59 views2 pages

CH 4 Worksheet

This document contains 5 questions related to changes in partnership profit/loss sharing ratios and the accounting entries required to record the effects of these changes. The questions cover topics such as calculating the impact on individual partner's capital due to a ratio change, adjusting goodwill through partner's capital accounts or raising/writing it off, valuing and recording goodwill when the ratio changes, distributing an investment fluctuation reserve when ratios change, and making various revaluations/adjustments to accounts when ratios change along with other partnership terms.

Uploaded by

HIMANSHU NAGAR
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question 1:

 
A and B are sharing profits and losses equally. With effect from 1st April, 2019, they agree to
share profits in the ratio of 4 : 3. Calculate individual partner's gain or sacrifice due to the
change in ratio.

Question 2:

A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st
April, 2019, they agreed to share profits equally. The goodwill of the firm was
valued at  ` 18,000. Pass necessary Journal entries when: (a) Goodwill is adjusted through
Partners' Capital Accounts; and (b) Goodwill is raised and written off.

Question 3:

Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1.
From 1st April, 2019 they decided to share profits equally. The Partnership Deed provides
that in the event of any change in profit-sharing ratio, goodwill shall be valued at three years'
purchase of average profit of last five years. The profits and losses of past five years are:
Profit − Year ended 31st March, 2015 −  ` 1,00,000; 2016 −  ` 1,50,000; 2018 −  ` 2,00,000;
2019 −  ` 2,00,000.
Loss − Year ended 31st March, 2017 −  ` 50,000.
Pass the Journal entry showing the working.

Question 4:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share
future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute
'Investments Fluctuation Reserve' of  ` 20,000 at the time of change in profit-sharing ratio,
when investment (market value  ` 95,000) appears in the books at  ` 1,00,000.

Question 5:

 A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance
Sheet as at 31st March, 2019 stood as follows:
 
Amount Amount
Liabilities ( `) Assets  ( `)
Capital A/cs:   Land and Building 3,5
 A 2,50,000   Machinery 2,4
 B 2,50,000   Computers 7
 C 2,00,000 7,00,000 Investments (Market value  ` 90,000) 1,0
General Reserve   60,000 Sundry Debtors 5
Investments Fluctuation
Reserve   30,000 Cash in Hand 1
Sundry Creditors   90,000 Cash at Bank 5
      Advertisement Suspense
    8,80,000   8,8
         

They decided to share profits equally w.e.f. 1st April, 2019. They also agreed that:
(i) Value of Land and Building be decreased by 5%.
(ii) Value of Machinery be increased by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at  ` 20,000 was unrecorded and is now to be recorded in the
books.
(v) Out of Sundry Creditors,  ` 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years' purchase of last 3 years profits. Profits being for
2018-19 −  ` 50,000 (Loss); 2017-18 −  ` 2,50,000 and 2016-17 −  ` 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at a remuneration (including
expenses) of  ` 5,000. Expenses came to  ` 3,000.
Pass Journal entries and prepare Revaluation Account.

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