TS Grewal Solutions for Class 12 Accountancy Vol 1 Chapter 7

0
67

Class 12 Accountancy Vol 1 Chapter 7- Dissolution of Partnership Firm

Question 1

A, B and C’s firm was dissolved on 31st March 2018. B demands that his loan of ₹. 50,000/- should be paid before payment of capitals of the partners. But, A and C demand that the capital should be paid before the payment of B’s loan. In such a scenario, who is right?

Solution:
B is right in this case. According to Section 48 of the Indian Partnership Act, 1932 partners loan is paid before the payment of the partner’s account.

Question 2

X and Y are partners in an enterprise sharing profits in the ratio of 3:2. Mrs X has given a loan of ₹. 30,000/- to the firm and the firm had also taken a loan of ₹.10,000/- from X. The firm was dissolved and its assets were realised for ₹.30,000/-. State the order of payment of Mrs X’s loan and Y’s loan with reason, if there were no other creditors of the firm.

Solution:

According to Section 48 of the Indian Partnership Act, 1932, Mrs X’s loan of ₹. 30,000/- being an outside party’s debt will be paid before payment of Y’s loan. Y will be paid up to be available on cash ₹. 5,000/-

Question 3

What journal entries would be passed for the following transactions on the dissolution of an enterprise of partners A and B?

  • Old furniture which had been written off in the books was sold for ₹. 20,000/-
  • ‘P’ an old customer whose account for ₹. 10,000/- was written off as bad debt in the previous year, paid 70%
  • ‘A’ agreed to take over the enterprise’s goodwill (not recorded in the books of a firm) at ₹. 50,000/-
  • There was an old computer which had been written off from the books. It was estimated to realise ₹.5,000/-. It is taken by ‘B’ a partner at the estimated price of less than 30%.
  • Investments costing ₹.20,000/- (being 1000 shares) had been written off from the books. Thses shares or investments are valued at ₹.15/- each and divided among the partners in their profit sharing ratio.

Solution:

Journal Entries
Date Particulars L.F. Debit Credit
Bank A/c Dr. 20,000
To realization A/c
(Being the already written off furniture sold)
20,000
Bank A/c Dr. 7,000
To realization A/c
(Being the debt already written off recovered)
7,000
A’s capital A/c Dr. 50,000
To realization A/c
(Being the unrecorded goodwill taken over by A)
50,000
B’s capital A/c Dr. 3,500
To realization A/c
(Being the computer already written off taken over by B)
3,500
A’s capital A/c Dr. 7,500
B’s capital A/c Dr. 7,500
To realization A/c
(Being investments (shares) written off taken over by A and B in their profit sharing ratio)
15,000

Question 4

Virat and Ranveer were partners in firm sharing profits in the ratio of 4:1. On March 31st, 2018, their balance sheet was as follows:

Balance Sheet of Virat and Ranveer as on 31st March 2018
Liabilities Assets
Creditors 45,000 Bank 55,000
Workmen Compensation Fund 40,000 Debtors 60,000
Ranveer’s current account 65,000 Stock 85,000
Capital a/c: Furniture 1,00,000
Virat 2,00,000 Machinery 1,30,000
Ranveer 1,00,000 Virat’s current a/c 20,000
4,50,000 4,50,000

On the above date, the firm was dissolved:

  • Virat took over 40% of the stock @ 10% less than its book value and the remaining stock was sold for ₹. 40,000/-. Furniture realized @ ₹. 80,000/-
  • An unrecorded investment was sold for ₹.20,000/-. Machinery was sold at a loss of ₹. 60,000/-
  • Debtors realized at ₹. 55,000/-
  • There was an outstanding bill for the repairs for which ₹.19,000/- was paid

Prepare Realization Account.

Solution:

Dr. Realization Account Cr.
Particulars Particulars
To Debtors 60,000 By Creditors 45,000
To Stock A/c 85,000 By Virat’s capital A/c
[Stock = 34,000-3,400]
30,600
To Furniture A/c 1,00,000 By bank A/c (Assets realized):
To Machinery A/c 1,30,000 Stock (remaining) 40,000
To bank A/c (payment) – Furniture 80,000
O/S bills for repairs 19,000 Investment 20,000
Creditors 45,000 64,000 Machinery 70,000
Debtors55,000 2,65,000
By loss transferred to:
Virat’s capital A/c 78,720
Ranvir’s capital A/c19,680 98,400
4,39,000 4,39,000

Question 5

Suhas and Saptham were partners in a firm sharing profits in the ratio of 3:2. In spite of repeated reminders by the authorities, they kept dumping hazardous materials into a nearby river. The court ordered for the dissolution of their partnership firm on 31st March 2018. Suhas was deputed to realize the assets and to pay the liabilities. He was paid 1,000/- as a commission for his services. The financial position of the firm on 31st March 2018 was as follows:

Balance Sheet as at 31st March 2012
Liabilities Assets
Creditors 80,000 Building 1,20,000
Mrs Suhas’s loan 40,000 Investments 30,000
Saptham’s loan 24,000 Debtors 34,000
Investments Fluctuations Fund 8,000 (-) Provision4,000
for doubtful debts
30,000
Capital A/c: Bills receivable 37,400
Suhas 42,000 Cash 6,000
Saptham42,000 84,000 Profit and Loss A/c 8,000
Goodwill 4,000
2,36,000 2,36,000

The following was agreed upon:

  • Suhas agreed to pay his wife’s loan
  • Debtors realized ₹.24,000/-
  • Saptham took all the investments at ₹.27,000/-
  • Building realized at ₹.1,52,000/-
  • Creditors were payable after 2 months. They were paid immediately at a 10% discount
  • Bills receivables were settled at a loss of ₹.1,400/-
  • Realization expenses amounted to ₹. 2,500/-

Now, prepare Realization A/c. Partner’s capital A/c and cash A/c to close the books of the firm.

Solution:

Dr. Realisation Account Cr.
Particulars Particulars
To Building 1,20,000 By Provision for Doubtful Debts 4,000
To Investments 30,600 By Creditors 80,000
To Debtors 34,000 By Mrs Suhas’s loan 40,000
To Bills Receivable 37,400 By Investments Fluctuations Fund 8,000
To Goodwill 4,000 By cash A/c (assets realised):
To Suhas’s capital A/c (Wife’s loan) 40,000 Debtors 24,000
To Cash: Building 1,52,000
Creditors 72,000 Bills Receivable36,000 2,12,000
Realisation Expenses2,500 74,500 By Saptham’s capital A/c
(Investments)
27,000
To Suhas’s capital A/c
(Commission paid)
1,000
To Gain (Profit) transferred to:
Suhas’s capital A/c 17,700
Saptham’s capital A/c11,800 29,500
3,71,000 3,71,000

 

Dr. Partner’s Capital Account Cr.
Particulars Suhas Saptham Particulars Suhas Saptham
To Profit and Loss A/c 4,800 3,200 By balance b/d 42,000 42,000
To Realisation A/c (Investment) 27,000 By Realisation A/c (Commission) 1,000
To Cash A/c (bal.fig.) 95,900 23,600 By Realisation A/c (Wife’s loan) 40,000
By Realisation A/c
(Gain profit)
17,700 11,800
1,00,700 53,800 1,00,700 53,800

 

Dr. Cash Account Cr.
Particulars Particulars
To Balance b/d 6,000 By Realisation A/c 74,500
To Realisation A/c
– Assets realised
2,12,000 By Saptham’s loan A/c 24,000
By Suhas’s capital A/c – final payment 95,900
By Saptham’s capital A/c – final payment 23,600
2,18,000 2,18,000

Question 6

Following is the Balance Sheet of X and Y as at 31 March 2018 who share profits and losses in the ratio of 3:2.

Liabilities Assets
Sundry creditors 75,000 Cash at bank 4,500
Bills payable 30,000 Stock 25,000
Mr X’s loan 25,000 Debtors 40,500
Workmen compensation reserve 8,000 (-) provision for doubtful
Debts1,000
39,500
Bank loan 50,000 Bills receivable 15,000
General reserve 30,000 Investments 60,000
Capital account: Plant and Machinery 80,000
X 30,000 Building 64,000
Y40,000 70,000
2,85,000 2,85,000

On the above date, the firm was dissolved and the following arrangements were made:

  • X promised to pay X’s loan and took half of the investments at 10% discount
  • Stock and remaining investments were sold at 10% discount
  • X and Y agreed that Y shall use the firm’s name for which he will pay ₹. 40,000/-. He also agreed to pay bills payable at a discount of 10%
  • Debtors realised ₹. 35,000/-, Bills receivable ₹. 13,500/-, Plant and Machinery ₹. 38,900/-, Building ₹. 1,20,000/-
  • There was a car in the firm, which was written off from the books. It was taken over by X for ₹. 23,400/-
  • Creditors were paid 90% in full and final settlement of their dues
  • Expenses of dissolution amounted to ₹. 1,700/-

Prepare a Realization account, Capital account of the partners and Bank account in the books of the firm.

Solution:

Dr. Realisation Account Cr.
Particulars Particulars
To Sundry assets – Transfer: By Provision for doubtful debts 1,000
Stock 25,000 By Sundry creditors 75,000
Debtors 40,500 By Bills Payable 30,000
Bills receivable 15,000 By Mr X’s loan 25,000
Investments 60,000 By Bank loan 50,000
Plant and machinery 80,000 By A’s capital A/c – Investments
(₹. 30,000 – ₹. 3,000)
27,000
Building61,000 2,81,500 By Bank A/c – Assets realised:
Stock 22,500
(₹. 25,000 – ₹. 2,500)
To X’s capital A/c (Mrs. A’s loan) 25,000 Investments 27,000
(₹. 30,000 – ₹. 3,000)
To Y’s capital A/c (Bills Payable) 27,000 Debtors 35,000
To Bank A/c (Sundry Creditors) 67,500 Bills receivable 13,500
To Bank A/c (Bank Loan) 50,000 Plant and Machinery 38,900
To Bank A/c (Expenses) 1,700 Building1,20,000 2,56,900
To gain (profit) on realisation transferred to: By Y’s capital A/c – Goodwill 40,000
X’s capital A/c 45,360 By X’s capital A/c – car 23,400
Y’s capital A/c30,240 75,600
5,28,300 5,28,300

 

Dr. Partner’s Capital Account Cr.
Particulars X Y Particulars X Y
To Realization A/c – Assets 27,000 40,000 By balance b/d 30,000 40,000
To Realization A/c –
Car
23,400 By Realization A/c (gain profit) 45,360 30,240
To Bank A/c – Final payment 70,960 71,240 By Realization A/c – Liabilities 25,000 27,000
By General Reserve A/c 16,200 10,800
By Workmen compensation
Reserve A/c
4,800 3,200
1,21,360 1,11,240 1,21,360 1,11,240

 

Dr. Bank Account Cr.
Particulars Particulars
To balance b/d 4,500 By Realization A/c Creditors 67,500
To Realization A/c- Assets realized 2,56,900 By Realization A/c – Bank Loan 50,000
By Realization A/c – Expenses 1,700
By Realization A/c- Final Payment 70,960
By Realization A/c – Final Payment 71,240
2,61,400 2,61,400

Question 7

All the partners decide to dissolve the firm on 31st March 2018. Y, a partner demands that his loan of ₹. 1,00,000/- must be paid before the payment of Mrs X’s loan of ₹. 50,000/-. However, X, another partner, demands that Mr X’s loan must be paid before payment of Y’s loan. Who is right?

Solution:

X is right. According to Section 48 of the Indian Partnership Act, 1932, outside party’s debts are paid before payment of the partner’s loan. Mrs X is not a partner in the firm.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here