Page 116 - MA12

M.22 Management Accounting (Section B)—ISC XII

(v) Ali is also entitled to a commission of 10% of the net profit before charging
interest on drawings but after making appropriations.
During the year, Mohit withdrew ` 3,000 in the beginning of every month, Ali
withdrew ` 3,000 during every month and John withdrew ` 3,000 at the end of
every month.
On 1st October, 2019, John gave a loan of ` 5,00,000.
The manager is entitled to salary of ` 2,000 p.m. and a commission of 10% of net
profit after charging his salary and commission.
Net Profit of the firm for the year ended on 31st March, 2020 before providing
for any of the above adjustments was ` 2,37,000.
Prepare Profit and Loss Appropriation Account for the year ended on 31st March, 2020.
(b) Calculate goodwill of a firm on the basis of three years’ purchase of the
weighted average profit of the last four years. The appropriate weights to be
used and profits are:

Year 2016–17 2017–18 2018–19 2019–20
Profits (`) 1,01,000 1,24,000 1,00,000 1,40,000
Weights 1 2 3 4
On a scrutiny of books of account, following were noticed:
(i) On 1st December, 2018, major repair was carried on the plant incurring
` 30,000 which was charged to revenue. The said amount is agreed to be
capitalised for goodwill valuation subject to adjustment of depreciation of
10% p.a. on Reducing Balance Method.
(ii) Closing stock for the year 2017–18 was overvalued by ` 12,000.
(iii) To cover management cost, an annual charge of ` 24,000 should be made for
the purpose of goodwill valuation.
(iv) On 1st April, 2017 a machine having a book value of ` 10,000 was sold for
` 11,000 but the proceeds were wrongly credited to Profit and Loss Account.
No effect has been given to rectify the same. Depreciation is charged on
machine @ 10% p.a. on Reducing Balance Method. [6 + 6 = 12]
3. (a) Priya, Karam and Anna were partners of a firm sharing profits in the ratio of
3 : 2 : 1. Their Balance Sheet as at 31st March, 2020 was as follows:

BALANCE SHEET as at 31st March, 2020
Liabilities ` Assets `
Bills Payable 1,20,000 Cash at Bank 20,000
Creditors 1,40,000 Debtors 1,40,000
Karam’s Loan @ 5% 1,00,000 Bills Receivable 70,000
General Reserve 1,80,000 Stock 1,70,000
Capital A/cs: Investments 1,30,000
Priya 2,00,000 Advertisement Suspense A/c 1,20,000
Karam 1,20,000 Building 2,90,000
Anna 80,000 4,00,000
9,40,000 9,40,000