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M.24 Management Accounting (Section B)—ISC XII

5. Deepika and Rajshree are partners sharing profits and losses in the ratio of 3 : 2. Their
Balance Sheet as on 31st March, 2020 is as under:

Liabilities ` Assets `
Creditors 1,25,000 Goodwill 5,000
Workmen Compensation Reserve 10,000 Building 30,000
Investment Fluctuation Reserve 5,000 Furniture 1,25,000
Employees’ Provident Fund 5,000 Investments (Market Value ` 22,500) 25,000
Anshu’s Loan 1,50,000 Debtors 50,000
Capital A/cs: Less: Provision for Doubtful Debts 5,000 45,000
Deepika 88,000 Stock 1,50,000
Rajshree 1,27,000 2,15,000 Bank Balance 1,25,000
Advertisement Suspense A/c 5,000
5,10,000 5,10,000

On 1st April, 2020, they admit Anshu as a partner on the following terms:
(i) Deepika will sacrifice 1/3rd of her share while Rajshree sacrifices 1/10 from her
share in favour of Anshu.
(ii) Anshu’s loan will be converted into his capital.
(iii) Anshu brings 60% of his share of goodwill by cheque.
(iv) Goodwill is to be valued at 2 years’ purchase of super profit of last three completed
years. Profits for the last three years ended 31st March, are as follows:
2018—` 2,40,000; 2019—` 4,65,000; and 2020—` 6,90,000.
Normal profit is ` 3,15,000 with same amount of capital invested in similar industry.
(v) Value of building is to be increased by ` 25,000, value of Stock and Furniture
to be reduced by 15% and 10% respectively. Provision for Doubtful Debts is
to be made equal to 5% of the debtors.
(vi) Claim on account of Workmen Compensation is ` 5,000.
(vii) An unrecorded accrued interest income of ` 5,000 to be accounted. A debtor
whose dues of ` 25,000 were written off as bad debts, paid ` 20,000 in full
settlement.
(viii) Workmen Compensation Reserve and Investment Fluctuation Reserve are to
appear in the books of new firm after adjusting Workmen Compensation Claim
and difference between book value and market value of investment.
(ix) Capitals of the partners shall be proportionate to their profit-sharing ratio taking
Anshu’s capital as base. Adjustment of capital to be made by cash.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet. [12]

6. On 1st April, 2018, Strong Ltd. issued ` 40,00,000, 10% Debentures of ` 100 each at
a premium of 5% and redeemable at a premium of 10% in equal annual drawings by
draw of lots in 2 years. The company decides to write off loss on issue at the end of
first year itself. It has a balance of ` 1,75,000 in Capital Reserve and ` 50,000 in Securities
Premium Reserve.
Pass the necessary Journal entries during the years of Issue and Redemption of Debentures
without providing for the interest. Also pass accounting entry for writing off Loss on
Issue of Debentures. [12]