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Model Test Papers M.395

Important Note: Observe the difference between:
• ‘Furniture (Book Value ` 50,000) Reduced by 40%—It means value is to be reduced
by 40%. Decrease in value of Furniture = ` 50,000 × 40/100 = ` 20,000’.
• ‘Furniture (Book Value ` 50,000) Reduced to 40%—It means value is to be reduced
by 60%. Decrease in value of Furniture = ` 50,000 × 60/100 = ` 30,000’.
(b) JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
2018
April 1 A’s Capital A/c (` 50,000 × 3/5) ...Dr 30,000
B’s Capital A/c (` 50,000 × 2/5) ...Dr. 20,000
To Goodwill A/c 50,000
(Being the existing goodwill written off in the old ratio)
Bank A/c (` 10,00,000 + 60% of ` 1,50,000) ...Dr. 10,90,000
To C’s Capital A/c 10,00,000
To Premium for Goodwill A/c 90,000
(Being the amount brought in by C for his share of goodwill and Capital)
Premium for Goodwill A/c ...Dr. 90,000
C’s Current/Capital A/c ...Dr. 60,000
To A’s Capital A/c (` 1,50,000 × 2/5) 60,000
To B’s Capital A/c (` 1,50,000 × 3/5) 90,000
(Being C’s share of goodwill credited to A and B in their sacrificing ratio, i.e., 2 : 3)
A’s Capital A/c ...Dr. 30,000
B’s Capital A/c ...Dr. 45,000
To Bank A/c 75,000
(Being 50% of the amount of goodwill credited to A and B
withdrawn by them)
Note: Firm’s Goodwill = (` 3,50,000 – ` 2,00,000) × 5 = ` 7,50,000
C’s Share in Goodwill = ` 7,50,000 × 1/5 = ` 1,50,000.
14. AN EXTRACT OF INCOME AND EXPENDITURE ACCOUNT
Dr. for the year ending 31st March, 2018 Cr.
Expenditure ` Income `

To Salaries A/c (WN 2) 2,00,000 By Subscription (WN 1) 5,76,000
To Sports Material Consumed 2,52,000
(WN 3 and 4)
AN EXTRACT OF BALANCE SHEET
as at 31st March, 2018
Liabilities ` Assets `
Advance Subscription 20,800 Subscription Due 28,000
Creditors for Sports Materials 36,000 Advance for Sports Materials 12,000
Outstanding Salaries 36,000 Stock of Sports Materials 28,000
Prepaid Salaries 12,000