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M.122 An Aid to Accountancy—CBSE XII

Working Notes:
1. Goodwill has been further raised by ` 60,000. Since question says that A was given credit of ` 30,000, it
implies that total Goodwill Account in the books of the firm must be raised by ` 60,000.
` `
Goodwill A/c ...Dr. 60,000
To A’s Capital A/c 30,000
To B’s Capital A/c 18,000
To C’s Capital A/c 12,000

2. Calculation of Cash brought in by B and C: `
Capital of B after adjustment of goodwill and revaluation loss 1,03,330
(` 1,72,500 + ` 18,000 – ` 7,170 – ` 80,000)
Capital of C after adjustment of goodwill and revaluation loss 57,220
(` 1,30,000 + ` 12,000 – ` 4,780 – ` 80,000)
Shortage of cash (to be brought in by B and C) 2,01,550
Total capital of the new firm after the retirement of A 3,62,100
B’s capital in the new firm = ` 3,62,100 × 1/2 = ` 1,81,050
C’s capital in the new firm = ` 3,62,100 × 1/2 = ` 1,81,050
B will bring = ` 1,81,050 – ` 1,03,330 = ` 77,720
C will bring = ` 1,81,050 – ` 57,220 = ` 1,23,830.
3. Dr. BANK ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 62,000 By Balance c/d 2,63,550
To B’s Capital A/c 77,720
To C’s Caapital A/c 1,23,830
2,63,550 2,63,550

PART B
18. The statement ‘An enterprise may hold securities and loans for dealing or trading
purposes in which case they are similar to inventory acquired specifically for resale’
is correct. Cash Flow from such activities will be classified as Operating Activity.
19. Cash Equivalents are short-term, highly liquid investments that are readily
convertible into known amount of cash and which are subject to an insignificant risk
of change in value.
20. (a)

Items Major Head Sub-head
1. Trade Receivables Current Assets Trade Receivables
2. Provision for Tax Current Liabilities Short-term Provisions
3. Preliminary Expenses* ... ...
4. Loose Tools Current Assets Inventories
5. Interest Accrued on Investments Current Assets Other Current Assets
6. Goodwill Non-current Assets Fixed Assets: Intangible Assets
*Nowhere, since as per AS-26 these expenses are to be written off within the year in which these are incurred.