3 Marks Question

Question 13 Marks

The profits of a firm for the last five years were:

Year $\rightarrow$	2011	2012	2013	2014	2015
Profits (Rs.)	45,000	50,000	52,000	65,000	85,000

Calculate the value of goodwill on the basis of two years of purchase of weighted average profits, the weights to be used are 2011 - 1, 2012 - 2, 2013 - 3, 2014 - 4 and 2015 - 5.

Answer

STEP 1;

Calculation of total weighted profit
Year	Profit (Rs.)	Weights	Weights Profit
(A)	(B)	(C)	(D) = (B $\times$ C)
	Rs.		Rs.
2011	45,000	1	45,000
2012	50,000	2	1,00,000
2013	52,000	3	1,56,000
2014	65,000	4	2,60,000
2015	85,000	5	4,25,400
	Total	15	9,86,400

STEP 2;
Weighted Average Profit $=\frac{\text { Total weighted profit }}{\text { Total of weights }}$
$=\frac{9,86,400}{15}=$ Rs. 65,760
STEP 3;
Goodwill = Weighted Average Profit $\times$ No. of years purchase
= 65760 $\times$ 2 = Rs.1,31,520

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Question 23 Marks

A Ltd. forfeited 600 Equity Shares of ₹ 10 each issued at a premium of 20% to Rajat who had applied for 720 Equity Shares, for non-payment of allotment money of ₹ 5 per equity share (including premium) and the first and final call of ₹ 5 per equity share. Out of these, 200 Equity Shares were reissued to Sanjay credited as fully paid for ₹ 9 per equity share. As per the terms of issue, company was to retain the excess application money to adjust against calls. Pass Journal entries to record forfeiture and reissue of shares.

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Question 33 Marks

Z Ltd purchased machinery from K Ltd, Z Ltd, paid K Ltd as follows
i. By issuing 5,000 equity shares of ₹ 10 each at a premium of 30%.
ii. By issuing 1,000, 8% debentures of ₹ 100 each at a discount of 10%.
iii. Balance by giving a promissory note of ₹ 48,000 payable after two months.
Pass necessary journal entries for the purchase of machinery and payment to K Ltd in the books of Z Ltd.

Answer

Purchase Consideration:	₹
(i) 5,000 Equity Shares @ ₹ 13	65,000
(ii) 1,000 Debentures @ ₹ 90	90,000
(iii) Promissory Note	48,000
	2,03,000

Journal of Z Ltd.
(i)	Machinery A/c	Dr.	2,03,000
	To K Ltd			2,03,000
	(Machinery purchased from K Ltd.)
(ii)	K Ltd	Dr.	65,000
	To Equity Share Capital A/c			50,000
	To Securities Premium A/c			15,000
	(Part payment made by issue of 5,000 equity shares of ₹ 10 each at ₹ 13)
(iii)	K Ltd A/c	Dr.	90,000
	Discount on Issue of Debentures A/c	Dr.	10,000
	To 8% Debentures A/c			1,00,000
	(Part payment made by issue of ₹ 1,00,000 debentures at 10% discount)
(iv)	K Ltd.	Dr.	48,000
	To Bills Payable A/c			48,000
	(Balance payment made by giving promissory note)
(v)	Securities Premium A/c	Dr.	10,000
	To Discount on Issue of Debentures A/c			10,000
	(Discount on issue of debentures written off)

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Question 43 Marks

Ravi and Rahul are partners in a firm. Ravi was to get a commission of 10% on the net profits before charging any commission. However, Rahul was to get a commission of 10% on the net profits after charging all commissions. Fill in the missing figures in the following Profit and Loss Appropriation Account for the year ended 31^st March 2023:

PROFIT AND LOSS APPROPRIATION ACCOUNT
for the year ended 31st March, 2023
Dr.			Cr.
Particulars		₹	Particulars	₹
To Ravi's Commission (₹ _________ $\left.\times \frac{10}{100}\right)$		44,000	By Profit & Loss A/c	______
To Rahul's Commission		______
To Profit transferred to:
Ravi's Capital A/c	______
Rahul's Capital A/c	______	______
		______		______

Answer

PROFIT AND LOSS APPROPRIATION A/C
for the year ended 31^st March, 2023
Dr.			Cr.
Particulars		₹	Particulars	₹
To Ravi's Commission (₹ 4,40,000 $\left.\times \frac{10}{100}\right)$		44,000	By Profit & Loss Account	4,40,000
To Rahul's Commission (₹ 3,96,000 $\left.\times \frac{10}{110}\right)$		36,000
To Profit transferred to Capital Account
Ravi's Capital A/c	1,80,000
Rahul's Capital A/c	1,80,000	3,60,000
		4,40,000		4,40,000

Working Notes:
i. Calculation of profit before charging any commission:-
Ravi's Commission @ 10% on the net profits before charging any commission = 44,000 .
$\therefore$ Total Profit before charging any commission = ₹ 44,000 $\times \frac{100}{10}=$ ₹ 4,40,000
ii. Calculation of Rahul's commission:-
Profit after charging Ravi's Commission = ₹ 3,96,000 (₹ 4,40,000 - ₹ 44,000)
Commission of Rahul = ₹ 3,96,000 $\times \frac{10}{110}$ = ₹ 36,000

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Question 53 Marks

Yogesh and Raju are partners in firm sharing profits and losses in the ratio of 3 : 2. Their fixed capitals as on 1^st April, 2022, were ₹ 6,00,000 and ₹ 4,00,000 respectively.
Their partnership deed provided for the following :
i. Partners are to be allowed interest on their capitals @ 10% per annum.
ii. They are to be charged interest on drawings @ 4% per annum.
iii. Yogesh is entitled to a salary of ₹ 2,000 per month.
iv. Raju is entitled to a commission of 5% of the correct net profit of the firm before charging such commission.
v. Yogesh is entitled to rent of ₹ 3,000 per month for the use of his premises by the firm.
The net profit of the firm for the year ended 31^st March, 2023, before providing for any of the above clauses was ₹ 4,00,000. Both partners withdrew ₹ 5,000 at the beginning of every month for the entire year.
You are required to prepare a Profit and Loss Appropriation Account for the year ended 31^st March, 2023.

Answer

PROFIT AND LOSS APPROPRIATION ACCOUNT
for the year ended 31^st March, 2023
Dr.			Cr.
Particulars		₹	Particulars		₹
To Interest on Capital A/c			By Profit & Loss A/c (Net Profit)	4,00,000
Yogesh's Current A/c	60,000		Less: Rent	36,000	3,64,000
Raju's Current A/c	40,000	1,00,000	By Interest on drawings
To Salary			Yogesh Current A/c	1,300
Yogesh's Current A/c		24,000	Raju's Current A/c	1,300	2,600
To Commission
Raju's Current A/c		18,200
To Profit transferred to:
Yogesh's Current A/c	1,34,640
Raju's Current A/c	89,760	2,24,400
		3,66,600			3,66,600

W.N.:
i. Interest on Drawings: $60,000 \times \frac{4}{100} \times \frac{6.5}{12}=$ ₹ $1,300$
ii. Commission $=5\%$ on ₹ $3,64,000=$ ₹ $18,200$.

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Question 63 Marks

Bharti and Sashi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31^stMarch, 2023 their Balance Sheet was as under:

BALANCE SHEET OF Bharti AND Sashi
as at 31^st March, 2023
Liabilities	₹	Assets	₹
Sundry Creditors	13,800	Furniture	16,000
General Reserve	23,400	Land and Building	56,000
Investment Fluctuation Fund	20,000	Investments	30,000
Bharti's Capital	50,000	Trade Receivables	18,500
Sashi's Capital	40,000	Cash in Hand	26,700
	1,47,200		1,47,200

The partners have decided to change their profit sharing ratio to 1 : 1 with immediate effect. For the purpose, they decided that:
i. Investments to be valued at ₹ 20,000.
ii. Goodwill of the firm be valued at ₹ 24,000.
iii. General Reserve not to be distributed between the partners.
You are required to pass necessary Journal entries in the books of the firm. Show workings.

Answer

IN THE BOOKS OF BHARTI AND SASHI
JOURNAL
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2023
March 31	Investment Fluctuation Fund A/c	Dr.		20,000
	To Investments A/c				10,000
	To Bharti's Capital A/c				6,000
	To Sashi's Capital A/c				4,000
	(Being depreciation in the value of investment provided for and excess amount distributed)
March 31	Sashi's Capital A/c $\left(24,000 \times \frac{1}{10}\right)$	Dr.		2,400
	To Bharti's Capital A/c $\left(24,000 \times \frac{1}{10}\right)$				2,400
	(Being adjustment for goodwill due to change in profit-sharing ratio)
March 31	Sashi's Capital A/c $\left(23,400 \times \frac{1}{10}\right)$	Dr.		2,340
	To Bharti's Capital A/c $\left(23,400 \times \frac{1}{10}\right)$				2,340
	(Being adjustment for general reserve not distributed)

Working Notes:
Calculation of Change in Profit Sharing Ratio

Particulars	Bharti	Sashi
Old Ratio	$\frac{3}{5}$	$\frac{2}{5}$
New Ratio	$\frac{1}{2}$	$\frac{1}{2}$
Gain/Sacrifice	$\left(\frac{3}{5}-\frac{1}{2}\right)=\frac{1}{10}$ (Sacrifice)	$\left(\frac{2}{5}-\frac{1}{2}\right)=\left(-\frac{1}{10}\right)($ Gain $)$

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Accountancy 3 Marks Question

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