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M.438 An Aid to Accountancy—CBSE XII

Ram died on 30th June, 2018. The Partnership Deed provided for the following on the
death of a partner:
(a) Goodwill of the firm was to be valued at 3 years’ purchase of the average profit
of last 5 years. The profits for the years ended 31st March, 2017, 2016, 2015 and
2014 were ` 70,000; ` 60,000; ` 50,000 and ` 40,000 respectively.
(b) Ram’s share of profit or loss till the date of his death was to be calculated on the
basis of the profit or loss for the year ended 31st March, 2018.
(c) Liability for workmen compensation of ` 8,000 is to be created.
You are required to calculate the following:
(i) Goodwill of the firm and Ram’s share of goodwill at the time of his death.
(ii) Ram’s share in the profit or loss of the firm till the date of his death.
(iii) Prepare Ram’s Capital Account at the time of his death to be presented to
his Executors. (4)
12. X and Y are partners in a firm manufacturing solar cookers for sale, sharing profits
in the ratio of 2 : 1. They invested capitals of ` 20,00,000 and ` 10,00,000 respectively.
X withdrew the following amounts during the year for his personal use:
1st April ` 20,000
1st June ` 18,000
1st November ` 28,000
1st December ` 10,000
Y withdrew ` 30,000 in the beginning of each quarter (i.e., 1st day of each quarter) for
household expenses of his family. The firm also paid ` 10,000 per month as rent for
the premises owned by Y used as office of partnership firm.
(a) Calculate interest on Drawings @ 6% p.a. for the year 2017–18. Also explain the
accounting treatment of Interest on Drawings.
(b) State giving reason to which account rent paid to Y for the use of his premises is
debited. (3 + 1)
13. (a) X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. They decide to
share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April,
2018. An extract of their Balance Sheet as at 31st March, 2018 is as follows:
Liabilities ` Assets `

General Reserve 26,000 Advertisement Suspense A/c 20,000
Profit and Loss A/c 24,000
Pass necessary Journal entries.
(b) A business has earned average profit of ` 4,00,000 during the last few years and
the normal rate of return in similar business is 10%. Find value of goodwill by
(i) Capitalisation of Super Profit Method,
(ii) Super Profit Method if the goodwill is valued at 3 years’ purchase of super
profits, and
(iii) Capitalisation of Average Profit.
Assets of the business were ` 40,00,000 and its external liabilities ` 7,20,000. (6)