Page 97 - MA12

Model Test Papers M.3

4. (a) Priya, Riya and Siya are partners sharing profits in the ratio of 6 : 3 : 1. They admitted
Miya into partnership with effect from 1st April, 2020. New profit-sharing ratio
among Priya, Riya, Siya and Miya will be 3 : 3 : 3 : 1. Partners decide to record
the effect of the following without affecting the book values (after the required
adjustment from Workmen Compensation Reserve and Investment Fluctuation
Reserve) by passing an adjustment entry:
Book Values (`)
General Reserve 1,40,000
Profit and Loss (Cr.) 60,000
Advertisement Suspense A/c 50,000
Workmen Compensation Reserve 30,000
Investment Fluctuation Reserve 20,000
Additional Information:
(i) Claim on account of Workmen Compensation is ` 20,000.
(ii) Book value of Investment is ` 1,00,000 (Market Value ` 85,000).
Pass the required adjustment entry.
(b) Rose, Daisy and Lily were partners in a firm sharing profits and losses in the ratio of
3 : 1 : 1. On 31st March, 2020, their Balance Sheet was as under:
BALANCE SHEET as at 31st March, 2020
Liabilities ` Assets `
Trade Creditors 75,000 Cash at Bank 2,00,000
General Reserve 30,000 Sundry Debtors 1,50,000
Investments Fluctuation Reserve 45,000 Less: Provision for Doubtful Debts 25,000 1,25,000
Capital A/cs: Investments 1,75,000
Rose 3,50,000 (Market Value ` 2,00,000)
Daisy 2,50,000 Machinery 4,40,000
Lily 2,50,000 8,50,000 Goodwill 60,000
10,00,000 10,00,000
Rose retired on 1st April, 2020 and it was mutually agreed that:
(i) Goodwill of the firm be valued at ` 1,00,000.
(ii) Rose will take investments at its market value.
(iii) 25% of the General Reserve to be retained to meet a possible loss and the balance
to be distributed among all the partners.
(iv) A provision of ` 2,000 be made for outstanding legal charges.
(v) Out of the amount of insurance premium debited to Profit and Loss Account,
` 2,000 be carried forward as an unexpired insurance.
(vi) Rose to be paid ` 1,00,000 immediately on retirement and the balance to be
transferred to her Loan Account.
Pass necessary Journal entries for the above transactions in the books of the firm on
Rose’s retirement. [4 + 8 = 12]
5. (a) Partners Strong, Weak and Feeble of a firm distributed profit for the year ended
31st March, 2020 ` 1,40,000 in the ratio of 2 : 2 : 1 without providing for the following:
(i) Salary of ` 1,500 per quarter to Strong and Weak each.
(ii) Commission of ` 8,000 to Feeble.
(iii) Strong and Feeble had guaranteed a minimum profit of ` 50,000 p.a. to Weak.
(iv) Profits were to be shared in the ratio of 3 : 3 : 2.
Pass necessary Journal entry for the above adjustments in the books of the firm.