Chapter reconstitution-of-a-partnership-firm-retirement-death-of-a-partner: Reconstitution of a Partnership Firm – Retirement/Death of a Partner Case Study Questions | accountancy Class 12 CBSE

Chapter reconstitution-of-a-partnership-firm-retirement-death-of-a-partner: Reconstitution of a Partnership Firm – Retirement/Death of a Partner Case Study Questions | accountancy Class 12 CBSE | ByteNotes.in

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Case Set 1

Case Analysis

Passage

Rama, Shyam and Mohan are partners in a firm sharing profits and losses in the ratio of 4:3:2. On April 1, 2023, Shyam decides to retire from the firm. At the time of retirement, the firm's goodwill is valued at ₹90,000. Rama and Mohan decide to share future profits in the ratio of 5:4. The partners need to calculate the gaining ratio and adjust goodwill accordingly. The firm has been running profitably for the past five years and has accumulated reserves of ₹27,000 appearing in the Balance Sheet. The remaining partners must also settle all dues to Shyam and reconstitute the partnership on agreed terms.

Question 1: Calculate Shyam's share of goodwill at the time of his retirement.

Shyam's old profit sharing ratio = 3/9 = 1/3
Shyam's share of goodwill = 1/3 × ₹90,000 = ₹30,000

Question 2: Calculate the gaining ratio of Rama and Mohan after Shyam's retirement.

Gaining Share = New Share – Old Share
Rama's Gain = 5/9 – 4/9 = 1/9
Mohan's Gain = 4/9 – 2/9 = 2/9
Gaining Ratio of Rama and Mohan = 1:2

Question 3: Pass the necessary journal entry for adjustment of Shyam's share of goodwill and also for transfer of accumulated reserves to partners' capital accounts.

Journal Entry for Goodwill: Rama's Capital A/c Dr. ₹10,000; Mohan's Capital A/c Dr. ₹20,000; To Shyam's Capital A/c ₹30,000 (Shyam's share of goodwill adjusted in gaining ratio 1:2)
Journal Entry for Reserves: General Reserve A/c Dr. ₹27,000; To Rama's Capital A/c ₹12,000; To Shyam's Capital A/c ₹9,000; To Mohan's Capital A/c ₹6,000 (Accumulated reserves distributed in old ratio 4:3:2)

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Case Set 2

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Anita, Priya and Sunita are partners sharing profits and losses equally. Anita retires from the firm and her share is taken over by Priya and Sunita in the ratio of 3:2. On the date of retirement, the Balance Sheet shows the following assets: Land ₹1,50,000 (revalued to ₹1,80,000), Machinery ₹80,000 (revalued to ₹72,000), and Stock ₹40,000 (revalued to ₹35,000). The firm also has an unrecorded liability of ₹5,000 for outstanding expenses. All partners agreed that revaluation adjustments must be completed before determining Anita's final dues. The remaining partners will continue the business after settlement.

Question 1: Prepare the Revaluation Account showing the net profit or loss on revaluation.

Revaluation Account Dr. side: Machinery ₹8,000; Stock ₹5,000; Outstanding Expenses ₹5,000; Profit transferred to partners ₹22,000
Revaluation Account Cr. side: Land ₹30,000 — Net Profit on Revaluation = ₹12,000

Question 2: Calculate each partner's share of profit/loss on revaluation assuming old profit sharing ratio is 1:1:1.

Net Profit on Revaluation = Land appreciation ₹30,000 – Machinery depreciation ₹8,000 – Stock depreciation ₹5,000 – Outstanding liability ₹5,000 = ₹12,000
Each partner's share = ₹12,000 ÷ 3 = ₹4,000

Question 3: Calculate the new profit sharing ratio of Priya and Sunita and pass the journal entry for adjusting Anita's share of goodwill if the firm's goodwill is valued at ₹60,000.

Anita's share = 1/3; Priya and Sunita acquire it in ratio 3:2
Share acquired by Priya = 3/5 × 1/3 = 1/5; Priya's new share = 1/3 + 1/5 = 8/15
Share acquired by Sunita = 2/5 × 1/3 = 2/15; Sunita's new share = 1/3 + 2/15 = 7/15
New PSR = 8:7
Anita's goodwill = 1/3 × ₹60,000 = ₹20,000
Journal: Priya's Capital Dr. ₹12,000; Sunita's Capital Dr. ₹8,000; To Anita's Capital ₹20,000

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Case Set 3

Case Analysis

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Vinod, Ajay and Suresh are partners in a firm sharing profits in the ratio of 5:3:2. Suresh retires from the firm on March 31, 2023. On that date, Suresh's capital account shows a credit balance of ₹60,000. His current account has a debit balance of ₹5,000. The firm's goodwill is valued at ₹1,00,000. The firm's Balance Sheet shows General Reserve of ₹20,000 and Profit & Loss Account (Cr.) of ₹10,000. His share of profit up to the date of retirement is determined at ₹6,000. He is entitled to interest on capital at 10% p.a. for 6 months. The remaining partners decide to share future profits in the ratio of 5:3.

Question 1: Calculate the total amount due to Suresh at the time of retirement (excluding goodwill treatment through capital accounts).

Capital Account balance = ₹60,000
Less: Debit balance of current account = ₹5,000
Share of General Reserve = 2/10 × ₹20,000 = ₹4,000
Share of Profit & Loss (Cr.) = 2/10 × ₹10,000 = ₹2,000
Share of profit till retirement = ₹6,000
Interest on capital = ₹60,000 × 10/100 × 6/12 = ₹3,000
Total = ₹60,000 – ₹5,000 + ₹4,000 + ₹2,000 + ₹6,000 + ₹3,000 = ₹70,000

Question 2: Calculate the gaining ratio of Vinod and Ajay after Suresh's retirement.

New shares: Vinod = 5/8, Ajay = 3/8
Old shares: Vinod = 5/10, Ajay = 3/10
Vinod's gain = 5/8 – 5/10 = 25/40 – 20/40 = 5/40 = 1/8
Ajay's gain = 3/8 – 3/10 = 15/40 – 12/40 = 3/40
Gaining Ratio = 1/8 : 3/40 = 5:3

Question 3: Pass journal entries for (i) adjustment of Suresh's goodwill and (ii) if the total amount due to Suresh is ₹80,000 and he is paid ₹30,000 in cash with the balance treated as loan.

(i) Suresh's share of goodwill = 2/10 × ₹1,00,000 = ₹20,000; Vinod's Capital Dr. ₹12,500; Ajay's Capital Dr. ₹7,500; To Suresh's Capital A/c ₹20,000 (in gaining ratio 5:3)
(ii) Suresh's Capital A/c Dr. ₹80,000; To Cash/Bank A/c ₹30,000; To Suresh's Loan A/c ₹50,000

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Case Set 4

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Kavita, Leena and Meena are partners sharing profits in the ratio of 3:2:1. Leena retires and Kavita and Meena agree to share future profits in the ratio of 2:1. The goodwill of the firm is valued at ₹72,000. On the date of retirement, the Balance Sheet shows a debit balance in the Goodwill Account of ₹36,000. The capital balances after all adjustments (except goodwill) are: Kavita ₹90,000, Leena ₹55,000 and Meena ₹40,000. The partners must handle goodwill accounting correctly before arriving at the final settlement for Leena.

Question 1: Pass the journal entry to write off the existing goodwill appearing in the books.

Kavita's Capital A/c Dr. ₹18,000; Leena's Capital A/c Dr. ₹12,000; Meena's Capital A/c Dr. ₹6,000; To Goodwill A/c ₹36,000
(Existing goodwill written off in old profit sharing ratio 3:2:1)

Question 2: Calculate the gaining ratio of Kavita and Meena after Leena's retirement.

New shares: Kavita = 2/3, Meena = 1/3
Old shares: Kavita = 3/6 = 1/2, Meena = 1/6
Kavita's gain = 2/3 – 1/2 = 4/6 – 3/6 = 1/6
Meena's gain = 1/3 – 1/6 = 2/6 – 1/6 = 1/6
Gaining Ratio = 1:1

Question 3: Pass the journal entry for Leena's share of goodwill (based on current valuation of ₹72,000) to be adjusted through capital accounts without opening Goodwill Account. Also state the final amount due to Leena.

Leena's share = 2/6 × ₹72,000 = ₹24,000
Journal: Kavita's Capital Dr. ₹12,000; Meena's Capital Dr. ₹12,000; To Leena's Capital ₹24,000 (in gaining ratio 1:1)
Final amount due to Leena = ₹55,000 (adjusted balance) – ₹12,000 (goodwill written off) + ₹24,000 (goodwill credit) = ₹67,000

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Case Set 5

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Prabhat, Qasim and Ravi are partners in a firm sharing profits in the ratio of 2:2:1. Their Balance Sheet as on March 31, 2023 shows: Capitals – Prabhat ₹80,000, Qasim ₹80,000, Ravi ₹40,000; General Reserve ₹25,000; Creditors ₹15,000; Assets – Buildings ₹1,00,000, Machinery ₹60,000, Stock ₹30,000, Cash ₹50,000. Ravi retires on that date. Buildings are appreciated by 20%, Machinery is depreciated by 10%, and stock is revalued at ₹27,000. The firm's goodwill is valued at ₹50,000. Prabhat and Qasim will share future profits equally. Ravi is paid ₹20,000 immediately and the balance is transferred to his loan account.

Question 1: Prepare the Revaluation Account for Ravi's retirement.

Dr. side: Machinery depreciation ₹6,000; Stock depreciation ₹3,000; Profit transferred to partners ₹21,000
Cr. side: Building appreciation ₹30,000
Net profit = ₹21,000 distributed in ratio 2:2:1

Question 2: Calculate Ravi's share of goodwill and pass the journal entry for adjustment through capital accounts.

Ravi's share of goodwill = 1/5 × ₹50,000 = ₹10,000
Gaining ratio: Prabhat's gain = 1/2 – 2/5 = 1/10; Qasim's gain = 1/2 – 2/5 = 1/10; Gaining ratio = 1:1
Journal: Prabhat's Capital Dr. ₹5,000; Qasim's Capital Dr. ₹5,000; To Ravi's Capital A/c ₹10,000

Question 3: Calculate the total amount due to Ravi and pass journal entries for settlement (₹20,000 paid immediately, balance as loan). Also distribute the General Reserve.

General Reserve distributed: Prabhat ₹10,000; Qasim ₹10,000; Ravi ₹5,000 (in 2:2:1)
Ravi's capital = ₹40,000 + ₹4,200 (revaluation profit) + ₹5,000 (reserve) + ₹10,000 (goodwill) = ₹59,200
Journal for settlement: Ravi's Capital A/c Dr. ₹59,200; To Cash/Bank ₹20,000; To Ravi's Loan A/c ₹39,200

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Chapter reconstitution-of-a-partnership-firm-retirement-death-of-a-partner: Reconstitution of a Partnership Firm – Retirement/Death of a Partner | Case Study Questions

Passage

Question 1: Calculate Shyam's share of goodwill at the time of his retirement.

Question 2: Calculate the gaining ratio of Rama and Mohan after Shyam's retirement.

Question 3: Pass the necessary journal entry for adjustment of Shyam's share of goodwill and also for transfer of accumulated reserves to partners' capital accounts.

Passage

Question 1: Prepare the Revaluation Account showing the net profit or loss on revaluation.

Question 2: Calculate each partner's share of profit/loss on revaluation assuming old profit sharing ratio is 1:1:1.

Question 3: Calculate the new profit sharing ratio of Priya and Sunita and pass the journal entry for adjusting Anita's share of goodwill if the firm's goodwill is valued at ₹60,000.

Passage

Question 1: Calculate the total amount due to Suresh at the time of retirement (excluding goodwill treatment through capital accounts).

Question 2: Calculate the gaining ratio of Vinod and Ajay after Suresh's retirement.

Question 3: Pass journal entries for (i) adjustment of Suresh's goodwill and (ii) if the total amount due to Suresh is ₹80,000 and he is paid ₹30,000 in cash with the balance treated as loan.

Passage

Question 1: Pass the journal entry to write off the existing goodwill appearing in the books.

Question 2: Calculate the gaining ratio of Kavita and Meena after Leena's retirement.

Question 3: Pass the journal entry for Leena's share of goodwill (based on current valuation of ₹72,000) to be adjusted through capital accounts without opening Goodwill Account. Also state the final amount due to Leena.

Passage

Question 1: Prepare the Revaluation Account for Ravi's retirement.

Question 2: Calculate Ravi's share of goodwill and pass the journal entry for adjustment through capital accounts.

Question 3: Calculate the total amount due to Ravi and pass journal entries for settlement (₹20,000 paid immediately, balance as loan). Also distribute the General Reserve.

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