NCERT-admission of a new partner class 12 solution , -chapter -4Qestions and answers

why a new partner is admitted?

  1. A new partner may be admitted when the firm needs
  2. additional capital
  3. managerial help
  4. both

How can a new partner be admitted?

unless it is otherwise provide in the partnership deed a new partner can be admitted only when the existing partners unanimously agree for it.

Two main Rights acquired by a newly admitted partner

  1. Right to share the assets of the partnership firm
  2. Right to share the profits of the partnership firm
  3. Right to participate in the business activity

What does a new partner bring to acquired

To acquired share in the assets and profits of the firm, the partner brings.

  1. an agreed amount of capital either in cash or kind and / or some technical skill
  2. additional amount known as premium of goodwill

why is new partner required to bring premium ?

this is due to compensate the existing partners for loss of their share in the super profits of the firm, when a person pays for goodwill he pays for sacrifice of the profits by old partners .

why new ratio is calculated in case of an admission of a partner?

there is a need to ascertain the new profit sharing ratio among all the partner because on admission of a partner , the profit sharing ratio among the old partners will change keeping in view their respective contribution to the share of profit of the incoming partner.

matters that need adjustment at the time of admission.

  1. calculation of new profit-sharing ratio and sacrificing
  2. valuation and adjustment of goodwill
  3. accounting treatment of revaluation of assets and reassessment of liabilities
  4. Distribution of accumulated profits reserves and accumulated losses
  5. adjustment of capital in new profit sharing ratio

Question:1 (when new partner acquires his share from old partners in their old ratio. ) A and B are partners in a firm sharing profits and losses in the ratio 1:2 they admitted C into the partnership and decided to given him 1/3rd share of the future profits, find the new ratio of the partners,

Answer: (1) calculation of sacrifice share:

A’s sacrifice = 1/3 of 1/3 = 1/9

B’s sacrifice =2/3 of 1/3 =2/9

sacrificing Ratio= 1/9:2/9 = 1:2

(2) calculation of new profit sharing Ratio;

new share = old share–sacrifice share

A’s new share = 1/3–1/9 =(3–1)/9 =2/9

B’s new share =2/3–2/9 =(6–2)/9 = 4/9

C’s new share = 1/9+2/9 =3/9

New ratio among A, B and C; 2/9:4/9:3/9 = 2:4:3 respectively

Note: ratio agreed otherwise , it is presumed that the new partner acquires his share in profits from the old partners in their old profit sharing ratio,

Question:2 (when the new partner acquires his share from old partners in agreed share) L and M are partners in a firm sharing profits and losses in the ratio of 7:3 they admitted N for 3/7th share which he takes 2/7th from L and 1/7 from M calculate the new profit sharing ratio,

Answer: (1) As sacrifice share of old partners are given in the question itself, hence there is no need to calculate it,

(2) calculate of new profit sharing ratio:

new share = old share–sacrifice share

L’s new share =7/10–2/7 =49–20/70 =29/70

M’s new share = 3/10–1/7 =10–21/70 =11/70

N’s new share = 2/7+1/7 =3/7 (given)

new ratio among L,M,and N =29/70:11/70:3/7 = 29:11:30/70 = 29:11:30

Question:3 X and Y are partners in a firm sharing profit and losses in the ratio of 3:2 Z is admitted as partner in the firm for 1/6th share in profits, Z acquires his share from X and Y in the ratio of 2:1 calculate new profit sharing ratio of partners.

Answer: calculation of sacrifice share”

(1) given sacrificing Ratio =X:Y 2:1

therefore,

x’s sacrifice share =2/3 of 1/6 = 2/18

Y’s sacrifice share = 1/3 of 1/6 = 1/18

(2) calculation of new profit sharing ratio:

new share = old share–sacrifice share

X’s new share = 3/5-2/18 = 54-10/90 =44/90

Y’s new share = 2/5 -1/18 =36-5/90 =31/90

Z’s new share = 2/18+1/18 or 1/6 (given)

new ratio among X , Y and Z = 44/90:31/90;1/6 = 44:31:15/90 = 44:31:15

Question:4 ( when new partner acquires his share from old partners as a fraction of their share). A and B are partners in a firm sharing profit and losses in the ratio of 5;3 A surrenders 1/5th of his share, whereas B surrenders 1/3 of his share in favour of C, a new partner. calculate the new profit sharing ratio.

Answer: (1) calculation of sacrifice share

A sacrifice 1/5 of his share i;e 1/5 of 5/8 = 1/8

B sacrifice 1/3th of his share i:e 1/3 of 3/8 = 3/24 or 1/8

(2) calculation of new profit sharing ratio.

new share = old share-sacrifice share

A’s new share = 5/8-1/8 =4/8

B’s new share = 5/8-1/8 =2/8

C’s new share = 1/8+1/8 =2/8

new ratio among A, B and C = 4/8:2/8:2/8 = 4:2:2/8 = 2:1:1

Question:5 (old partners sacrifice): A and B partners sharing profits and losses in the ratio of 3:2 they admit C into partnership for 1/4 share in profits C brings , 3,00,000 as capital and ,1.00.000 as goodwill new profit sharing ratio of the partners shall be 3:3:2 pass necessary journal entries.

Answer;

Journal

date particularsL.FDebitCredit
bank A/c ——–Dr4,00,000
To premium for goodwill A/c 1,00,000
To C’s capital A/c 3,00,000
being the amount of goodwill and capital brought in by new partner C
premium for goodwill A/c —-Dr1,00,000
To A’s capital A/c 90,000
To B’s capital A/c 10,000
(being the amount of goodwill distributed between A and B in their sacrificing ratio i:e 9:1)

Note: sacrificing = old ratio-new ratio

A= 3/5-3/8 = 24-15/40 = 9/40

B’ = 2/5-3/8 =16-15/40 = 1/40

this sacrificing ratio between A and B i;e 9:1

Question:6 (existing goodwill to be written off): A and B are partners in a firm sharing profits and losses in the ratio of 3;2 they admit C into partnership for 1/5 share, C brings” 30,000 as capital and 10,000 as goodwill at the time of admission of C’ goodwill appears in the balance sheet of A and B at 3,000, new profit sharing ratio of partners shall be 5:3:2 pass necessary entries.

Answer:

Journal

dateparticulars L.Fdebitcredit
A’s capital A/c ——–Dr1,800
B’s capital A/c ————-Dr 1,200
To goodwill A/c 3,000
(being existing goodwill written off between old partners in their old ratio i:e 3:2)
bank A/c ————Dr40,000
To premium for goodwill A/c 10,000
To C’s capital A/c 30,000
(being ” the amount of goodwill and capital brought in by new partner C )
premium for goodwill A/c —–Dr 10,000
To A’s capital A/c 5,000
To B’s capital A/c 5,000
(being the amount of goodwill distributed between A and B in their sacrificing ratio i:e 1:1)

Notes sacrificing ratio = old ratio-new ratio

A= 3/5-5/10 =6-5/10 =1/10

B = 2/5-3/10 =4-3 /10 =1/10

sacrificing ratio between A and B = 1:1 i:e equal

Question:7 following is the balance sheet of shashi and ashu sharing profit and losses in the ratio of 3;2

particulars AmountAssetsAmount
creditors 18,000debtors 22,000
general reserve 25,000less: provision for DD 1000 21,000
workmens compensation fund 15,000land and building 18,000
capital shashi 15,000plant & machinery 12,000
capital ashu10,000stock 11,000
bank 21,000
83,00083,000

On admission of Tanya for 1/6th share in the profit it was decided that :

  1. provision for doubtful debts to be increased by Rs, 1,500
  2. value of land and building to be increased To Rs, 21,000
  3. value of stock to be increased by Rs, 2,500
  4. the liability of workmen’s compensation fund was determined to be Rs, 12,000
  5. Tanya brought in as her share of goodwill Rs, 10,000 in cash
  6. Tanya was to bring further cash of 15,000 for her capital . prepare Revaluation A/c capital A/c and the balance sheet of the new

Answer:

Revaluation Account

particulars AmountAssetsAmount
To provision for DD 1,500by land & building A/c 3,000
To capital shashi 3/524,00by stock 2,500
To capital ashu 2/51,600
5,5005,500

partners’ capital Account

particularsshashiashuTanyaparticularsshashi ashuTanya
To balance c/d40,20026,80015,000by balance b/d 15,00010,000
by general reserve 15,00010,000
by workmen’s compensation fund A/c 18,0012,00
by Revaluation A/c24,0016,00
by bank A/c 15,000
by premium for goodwill6,0004,000
40,20026,80015,00040,20026,80015,000

balance sheet

liabilities AmountAssetsRfAmount
creditors18,000debtors 22,000
liability for workmen compensation fund 12,000less: provision for DD 25,0019,500
capital / shashi40,200land & building 21,000
capital / ashu26,800plant & machinery 12,000
capital / Tanya 15,000stock 13,500
bank 46,000
1,12,0001,12,000

Question:8 A,B and C are partners sharing profits and losses and the ratio of 2:3:5, on 31st march 2015, their balance sheet was as follows

particularsAmountparticularsAmount
capital cash 18,000
A36,000bill receivable 24,000
B44,000furniture28,000
C52,000stock 44,000
creditors64,000debtors42,000
bill payable 32,000Investment32,000
profit & loss account14,000machinery 34,000
goodwill 20,000
2,42,0002,42,000

they admit D into particulars on the following terms:

  1. furniture and machinery to be depreciated by 15%
  2. stock is revaluated at Rs, 48,000
  3. goodwill to be valued at Rs, 24,000
  4. outstanding rent amount Rs, 1,800
  5. prepaid salaries Rs, 800
  6. D to bring Rs, 32,000 towards his capital for 1/6th share.

prepare Revaluation account, partners capital account and balance sheet of the new firm .

Answer:

Revaluation A/c

particularsAmountparticulars Amount
To furniture A/ c4,200by stock A/c 4,000
To machinery A/c 5,100by prepaid salaries A/c 800
To outstanding rent A/c 18,00by capital A/c loss
A 2/101,260
B 3/101,890
C 5/103,150
11,10011,100

partners capital account

particulars ABCDparticulars ABCD
To Revaluation 1,2601,8903,150by balance c/d 36,00044,00052,000
To goodwill A/c 4,0006,00010,000by P& L A/c 2,8004,2007,000
To A’s capital 800By D’s capital A/c 80012,002,000
To B’s capital 12,00by cash A/c 32,000
To C’s capital 2,000
To balance c/d 34,34041,51047,85028,000
39,60049,40061,00032,00039,60049,40061,00032,000

balance sheet of the new firm

liabilities AmountAssetsAmount
creditors 64,000cash 50,000
bill payable 32,000bill Receivable 24,000
outstanding rent 1,800furniture23,800
capital :stock 48,000
A34,340debtors42,000
B 41,510Investment32,000
C47,850machinery 28,900
D 28,000*prepaid salaries 800
2,49,5002,49,500
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