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Model Test Papers M.283

15. A, B and C were partners sharing profits and losses in the ratio of 2 : 3 : 1. On
31st March, 2018, their Balance Sheet was as under:

Liabilities ` Assets `
Capital A/cs: Goodwill 12,000
A 1,00,000 Building 2,50,000
B 2,00,000 Investment (Market Value ` 46,000) 50,000
C 3,00,000 6,00,000 Stock 80,000
Workmen Compensation Reserve 20,000 Debtors 3,00,000
Investment Fluctuation Reserve 10,000 Less: Provision for Doubtful Debts 10,000 2,90,000
Sundry Creditors 2,60,000 Cash at Bank 2,96,000
Bills Payable 1,00,000 Advertisement Suspense A/c 12,000
9,90,000 9,90,000

C died on 1st April, 2018. It is agreed that:
(a) A and B will share future profits and losses in the ratio of 3 : 2.
(b) Goodwill of the firm is to be valued at 2 years’ purchase of average profit of last
three completed years. The profits were—I ` 45,000; II ` 90,000; III ` 1,35,000.
(c) Building was found undervalued by ` 25,000 and Stock was found overvalued by
` 8,000.
(d) Provision for doubtful debts is to be made equal to 5% of the debtors.
(e) Claim on account of Workmen Compensation is ` 8,000.
(f) 50% of the amount payable to C’s Executor is to be paid immediately and balance
in two equal annual instalments together with interest @ 10%.
Pass the necessary Journal entries to record the above transactions. Also show
C’s Capital Account and C’s Executor’s Account. (6)
16. X and Y are partners, sharing profits and losses in the ratio of 3/5 : 2/5. They admit Z,
a differently abled person into the firm on 1st April, 2018, when their Balance Sheet
was as follows:
Liabilities ` Assets `

Creditors 45,000 Cash at Bank 15,000
General Reserve 36,000 Debtors 60,000
Capital A/cs: Less: Provision for Doubtful Debts 2,400 57,600
X 1,80,000 Patents 44,400
Y 90,000 2,70,000 Investments 24,000
Current A/cs: Fixed Assets 2,16,000
X 30,000 Goodwill 30,000
Y 6,000 36,000
3,87,000 3,87,000

Z is admitted on the following terms:
(a) Provision for Doubtful Debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to ` 15,000.
(c) An accrued income of ` 4,500 does not appear in the books of the firm. It is now to
be recorded.