31 :- Ram, Mohan, Sohan and Hari were partners in a firm sharing profits in the ratio of 4 : 3 : 2 : 1. On 1st April, 2016, their Balance Sheet was as follows:
From the above date, the partners decided to share the future profits in the ratio of 1 : 2 : 3 : 4. For this purpose the goodwill of the firm was valued at Rs 1,80,000. The partners also agreed for the following:
a) The claim for workmen’s compensation has been estimated at Rs 1,50,000.
b) Adjust the capital of the partners according to the new profit-sharing ratio by opening partners’ current accounts.
Prepare the Revaluation Account, Partner’s Capital Accounts, and the Balance Sheet of the reconstituted firm.
Solution :–
WORKING NOTES :-
(i) Calculation of sacrifice or gain of partners
Old ratio = 4:3:2:1
New ratio = 1:2:3:4
Ram = 4/10 – 1/10 = 3/10 (sacrifice)
Mohan = 3/10 – 2/10 = 1/10 (sacrifice)
Sohan = 2/10 – 3/10 = -1/10 (gain)
Hari = 1/10 – 4/10 = -3/10 (gain)
(ii) Calculation of adjustment of goodwill
Goodwill of the firm = Rs 1,80,000
Ram’s share of goodwill = 1,80,000 x 3/10 = Rs 54,000 (Cr.)
Mohan’s share of goodwill = 1,80,000 x 1/10 = Rs 18,000 (Cr.)
Sohan’s share of goodwill = 1,80,000 x 1/10 = Rs 18,000 (Dr.)
Hari’s share of goodwill = 1,80,000 x 3/10 = Rs 54,000 (Dr.)
JOURNAL ENTRY OF GOODWILL
Hari’s capital A/c Dr. 54,000
Sohan’s capital A/c Dr. 18,000
To Ram’s capital A/c 54,000
To Mohan’s capital A/c 18,000
(iii) Calculation of adjustment of capital
Total capital of the new firm = 4,42,000 + 4,59,000 + 2,26,000 + 1,43,000
= Rs 12,70,000
Ram’s capital = 12,70,000 x 1/10 = Rs 1,27,000
Mohan’s capital = 12,70,000 x 2/10 = Rs 2,54,000
Sohan’s capital = 12,70,000 x 3/10 = Rs 3,81,000
Hari’s capital = 12,70,000 x 4/10 = Rs 5,08,000