CBSE Class 12 Accountancy Retirement And Death Of Partner Worksheet Set 01

Very Short Answer Type Questions 

Question : A, B and C are partners sharing profits and losses in the ratio 5:3:2. B retires. Calculate the new ratio.

Question : X, Y and Z are partners sharing profits and losses in the ratio of 1/5, 1/3 and 7/15 respectively. Z retires and his share is taken up by X and Y in the ratio of 3:2. Calculate the new Ratio & gaining ratio.

Question : X, Y and Z are partners sharing profits and losses in the ratio of 4/8, 1/8,and 3/8 respectively. Z retires and surrenders4/9TH of his share in favour of X and remaining in favour of Y. Calculate. the New Ratio.

Question : A,B and C are partners sharing profits and losses in the ratio 4:3:2. B retires and the goodwill is valued at Rs.10,800. No goodwill appears as yet in the books of the firm. Assuming that A and C will share future profits in the ratio5:3, make entries for goodwill.

Question : P,Q and R are partners sharing profits and losses in the ratio 4:3:1. Q retires from the firm selling his share of profit to P for Rs.3,600 and R for Rs.4,500. The profit for the year after Q’s retirement was Rs.10, 500.Calculate the new profit sharing ratio and pass journal entries.

Question : A, B and C are equal partners in a firm. B retires and his claim including his Capital and his share of goodwill is Rs.40,000. He is paid in kind a vehicle valued at Rs.20,000 unrecorded in the books of the firm till the date of retirement and the balance in cash. Give the journal entries.

Question : A ,B and C are partners sharing profits as 20%,30% and 50%. A decided to retire with the consent of other partners and sold his share to B. Goodwill was valued at two and a half years purchase of the average profits of last three yeaRs. Profits of these three years were Rs. 50,000, Rs.70,000 and Rs. 60,000. Reserve fund stood in the balance sheet at Rs. 30,000 at the time of his retirement. You are required to record necessary journal entries to record above adjustments on A’s retirement.

Question : A,B and C are partners in a firm sharing profits in the ratio of 2:3:4 . On April 1, 2013, A retires and on that date there was a debit balance of Rs. 72,000 in the profit and loss account and a General Reserve of Rs.90,000 in the book. B and C decided to share future profits in the ratio of 2:1.Show the necessary journal entry for the treatment of profit and loss account balance on A’s retirement.

Question : Journalise the following :-

(a) Chander, Tara and Ravi were partners in a firm sharing profits in the ratio of 2:1:2 on 15.02.2007 Chander died and the new profit sharing ratio between Tara & Ravi was 4:11. On Chander’s death the goodwill of the firm was valued at Rs. 90,000. Calculate gaining ratio and pass necessary journal entry for the treatment of goodwill on Chander’s death without opening goodwill account.

(b) A, B, C and D are partners sharing profits in the ratio of 3:4:3:2. On the retirement of C, the goodwill was valued at Rs. 60,000. A, B and D decided to share future profits equally. Pass the necessary journal entry for the treatment of goodwill, without opening Goodwill Account.

Question. A, B and C are partners sharing profits and losses in the ratio \(5:3:2\). B retires. Calculate the new ratio.
Answer:
Old profit-sharing ratio of A, B and C = \(5:3:2\).
Since B retires, his share (\(\frac{3}{10}\)) is taken over by the remaining partners in their old profit-sharing ratio (as no other agreement is specified).
Therefore, the new ratio between A and C will be the same as their old mutual ratio.
New Ratio of A and C = \(5:2\).

Question. X, Y and Z are partners sharing profits and losses in the ratio of \(\frac{1}{5}\), \(\frac{1}{3}\) and \(\frac{7}{15}\) respectively. Z retires and his share is taken up by X and Y in the ratio of \(3:2\). Calculate the new Ratio & gaining ratio.
Answer:
Old Profit Sharing Ratio of X, Y and Z:
\[ \frac{1}{5} : \frac{1}{3} : \frac{7}{15} = \frac{3}{15} : \frac{5}{15} : \frac{7}{15} = 3:5:7 \]
Z's share = \(\frac{7}{15}\).
Z's share is taken up by X and Y in the ratio of \(3:2\).
Gaining Ratio of X and Y = \(3:2\).
Share gained by X = \(\frac{7}{15} \times \frac{3}{5} = \frac{21}{75}\).
Share gained by Y = \(\frac{7}{15} \times \frac{2}{5} = \frac{14}{75}\).
New Share of X = \(\text{Old Share} + \text{Share Gained} = \frac{3}{15} + \frac{21}{75} = \frac{15}{75} + \frac{21}{75} = \frac{36}{75}\).
New Share of Y = \(\text{Old Share} + \text{Share Gained} = \frac{5}{15} + \frac{14}{75} = \frac{25}{75} + \frac{14}{75} = \frac{39}{75}\).
New Ratio of X and Y = \(36:39 = 12:13\).

Question. X, Y and Z are partners sharing profits and losses in the ratio of \(\frac{4}{8}\), \(\frac{1}{8}\), and \(\frac{3}{8}\) respectively. Z retires and surrenders \(\frac{4}{9}^{\text{th}}\) of his share in favour of X and remaining in favour of Y. Calculate the New Ratio.
Answer:
Old Profit Sharing Ratio of X, Y and Z = \(4:1:3\).
Z's share = \(\frac{3}{8}\).
Share surrendered by Z in favour of X = \(\frac{3}{8} \times \frac{4}{9} = \frac{12}{72}\).
Share surrendered by Z in favour of Y = \(\frac{3}{8} \times \left(1 - \frac{4}{9}\right) = \frac{3}{8} \times \frac{5}{9} = \frac{15}{72}\).
New Share of X = \(\text{Old Share} + \text{Gained Share} = \frac{4}{8} + \frac{12}{72} = \frac{36 + 12}{72} = \frac{48}{72} = \frac{2}{3}\).
New Share of Y = \(\text{Old Share} + \text{Gained Share} = \frac{1}{8} + \frac{15}{72} = \frac{9 + 15}{72} = \frac{24}{72} = \frac{1}{3}\).
New Ratio of X and Y = \(2:1\).

Question. A, B and C are partners sharing profits and losses in the ratio \(4:3:2\). B retires and the goodwill is valued at Rs. \(10,800\). No goodwill appears as yet in the books of the firm. Assuming that A and C will share future profits in the ratio \(5:3\), make entries for goodwill.
Answer:
Old profit-sharing ratio of A, B and C = \(4:3:2\).
New profit-sharing ratio of A and C = \(5:3\).
Gaining Share = \(\text{New Share} - \text{Old Share}\).
Gain of A = \(\frac{5}{8} - \frac{4}{9} = \frac{45 - 32}{72} = \frac{13}{72}\).
Gain of C = \(\frac{3}{8} - \frac{2}{9} = \frac{27 - 16}{72} = \frac{11}{72}\).
Gaining Ratio of A and C = \(13:11\).
Total Goodwill of the firm = Rs. \(10,800\).
B's share of Goodwill = \(10,800 \times \frac{3}{9} = \text{Rs. } 3,600\).
B's share of Goodwill is compensated by gaining partners (A and C) in their Gaining Ratio (\(13:11\)):
A's contribution = \(3,600 \times \frac{13}{24} = \text{Rs. } 1,950\).
C's contribution = \(3,600 \times \frac{11}{24} = \text{Rs. } 1,650\).
Journal Entry:

Question. P, Q and R are partners sharing profits and losses in the ratio \(4:3:1\). Q retires from the firm selling his share of profit to P for Rs. \(3,600\) and R for Rs. \(4,500\). The profit for the year after Q’s retirement was Rs. \(10,500\). Calculate the new profit sharing ratio and pass journal entries.
Answer:
Old Profit Sharing Ratio of P, Q and R = \(4:3:1\).
Q's share of profit = \(\frac{3}{8}\).
Q sells his share to P and R in the ratio of the purchase price, i.e., \(3,600 : 4,500 = 4:5\).
Share gained by P = \(\frac{3}{8} \times \frac{4}{9} = \frac{12}{72} = \frac{1}{6}\).
Share gained by R = \(\frac{3}{8} \times \frac{5}{9} = \frac{15}{72} = \frac{5}{24}\).
New Share of P = \(\text{Old Share} + \text{Gained Share} = \frac{4}{8} + \frac{12}{72} = \frac{36 + 12}{72} = \frac{48}{72} = \frac{2}{3}\).
New Share of R = \(\text{Old Share} + \text{Gained Share} = \frac{1}{8} + \frac{15}{72} = \frac{9 + 15}{72} = \frac{24}{72} = \frac{1}{3}\).
New Profit Sharing Ratio of P and R = \(2:1\).

Journal Entries:

Question. A, B and C are equal partners in a firm. B retires and his claim including his Capital and his share of goodwill is Rs. \(40,000\). He is paid in kind a vehicle valued at Rs. \(20,000\) unrecorded in the books of the firm till the date of retirement and the balance in cash. Give the journal entries.
Answer:
Since the vehicle was unrecorded, it must be recorded prior to B's retirement. The revaluation profit of Rs. \(20,000\) will be distributed equally among old partners.

Journal Entries:

Question. A, B and C are partners sharing profits as \(20\%\), \(30\%\) and \(50\%\). A decided to retire with the consent of other partners and sold his share to B. Goodwill was valued at two and a half years purchase of the average profits of last three years. Profits of these three years were Rs. \(50,000\), Rs. \(70,000\) and Rs. \(60,000\). Reserve fund stood in the balance sheet at Rs. \(30,000\) at the time of his retirement. You are required to record necessary journal entries to record above adjustments on A’s retirement.
Answer:
Old Profit Sharing Ratio of A, B and C = \(20\% : 30\% : 50\% = 2:3:5\).
Since A sells his entire share (\(\frac{2}{10}\)) to B, the gaining partner is B only.
Average Profit of last three years = \(\frac{50,000 + 70,000 + 60,000}{3} = \text{Rs. } 60,000\).
Total Goodwill of the firm = \(2.5 \times 60,000 = \text{Rs. } 1,50,000\).
A's share of Goodwill = \(1,50,000 \times \frac{2}{10} = \text{Rs. } 30,000\).

Journal Entries:

Question. A, B and C are partners in a firm sharing profits in the ratio of \(2:3:4\). On April 1, 2013, A retires and on that date there was a debit balance of Rs. \(72,000\) in the profit and loss account and a General Reserve of Rs. \(90,000\) in the book. B and C decided to share future profits in the ratio of \(2:1\). Show the necessary journal entry for the treatment of profit and loss account balance on A’s retirement.
Answer:
Accumulated loss (debit balance of P&L) must be distributed among all partners in their old profit sharing ratio of \(2:3:4\).
A's share = \(72,000 \times \frac{2}{9} = \text{Rs. } 16,000\).
B's share = \(72,000 \times \frac{3}{9} = \text{Rs. } 24,000\).
C's share = \(72,000 \times \frac{4}{9} = \text{Rs. } 32,000\).

Journal Entry:

Question. Journalise the following :-
(a) Chander, Tara and Ravi were partners in a firm sharing profits in the ratio of \(2:1:2\) on 15.02.2007 Chander died and the new profit sharing ratio between Tara & Ravi was \(4:11\). On Chander’s death the goodwill of the firm was valued at Rs. \(90,000\). Calculate gaining ratio and pass necessary journal entry for the treatment of goodwill on Chander’s death without opening goodwill account.
(b) A, B, C and D are partners sharing profits in the ratio of \(3:4:3:2\). On the retirement of C, the goodwill was valued at Rs. \(60,000\). A, B and D decided to share future profits equally. Pass the necessary journal entry for the treatment of goodwill, without opening Goodwill Account.
Answer:
(a) Calculation of Gaining Ratio of Tara and Ravi:
Old Profit Sharing Ratio of Chander, Tara and Ravi = \(2:1:2\).
New Profit Sharing Ratio of Tara and Ravi = \(4:11\).
Gaining Share = \(\text{New Share} - \text{Old Share}\).
Tara's gain = \(\frac{4}{15} - \frac{1}{5} = \frac{4 - 3}{15} = \frac{1}{15}\).
Ravi's gain = \(\frac{11}{15} - \frac{2}{5} = \frac{11 - 6}{15} = \frac{5}{15}\).
Gaining Ratio of Tara and Ravi = \(1:5\).
Chander's share of Goodwill = \(90,000 \times \frac{2}{5} = \text{Rs. } 36,000\).
Tara's contribution = \(36,000 \times \frac{1}{6} = \text{Rs. } 6,000\).
Ravi's contribution = \(36,000 \times \frac{5}{6} = \text{Rs. } 30,000\).

(b) Calculation of Gaining Ratio of A, B and D on C's retirement:
Old Profit Sharing Ratio of A, B, C and D = \(3:4:3:2\).
New Profit Sharing Ratio of A, B and D = \(1:1:1\) (equally).
Gaining Share = \(\text{New Share} - \text{Old Share}\).
A's gain = \(\frac{1}{3} - \frac{3}{12} = \frac{4 - 3}{12} = \frac{1}{12}\).
B's gain = \(\frac{1}{3} - \frac{4}{12} = \frac{4 - 4}{12} = 0\).
D's gain = \(\frac{1}{3} - \frac{2}{12} = \frac{4 - 2}{12} = \frac{2}{12}\).
Gaining Ratio of A and D = \(1:2\) (B does not gain).
C's share of Goodwill = \(60,000 \times \frac{3}{12} = \text{Rs. } 15,000\).
A's contribution = \(15,000 \times \frac{1}{3} = \text{Rs. } 5,000\).
D's contribution = \(15,000 \times \frac{2}{3} = \text{Rs. } 10,000\).

Journal Entries:

Question. X, Y and Z are partners sharing profits and losses in the ratio of their capitals. Y retired on 31-12-2014 the date on which the B/S stood as under.

The other terms agreed upon are as under:-
a) Prepaid Insurance Rs. 1,000
b) Buildings appreciated by 10%
c) Provision for doubtful debts to be 5%
d) Machinery be depreciated by 5%
e) Provision of Rs. 1,500 be made for outstanding expenses.
f) Goodwill of the firm is valued at Rs. 18,000 and Y’s share is adjusted in the account of X and Z. Y is paid Rs. 5,000 immediately and the balance paid into 4 equal yearly installments together with 10% interest. Pass Journal entries, Prepare Revaluation a/c, Capital a/c, Balance sheet and Y’s loan a/c when it is paid into four equal yearly installments.
Answer:
Capital ratio of X, Y, and Z = \(45,000 : 30,000 : 15,000 = 3:2:1\).
Gaining ratio of X and Z = \(3:1\).

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of the New Firm as on 31-12-2014:

Y's Loan Account:

Question. X, Y and Z are partners sharing profits and losses in the ratio of their capitals. Y retired on 31-12-2009 and the date on which the B/S stood as under.

The following adjustments were made:-
a) Building appreciated by 20%, Stock depreciated by 10%, Provision for doubtful debts was to be 5% and a reserve for legal charges payable was to be made at Rs. 1,800.
b) Goodwill of the firm be valued at Rs. 48,000.
c) Rs. 40,000 from Y’s capital account be transferred to his loan account and balance be paid in cash.
d) The capital of the new firm be fixed at Rs. 1,00,000 and the new profit sharing ratio is 3:2.
Give necessary ledger account and prepare the new Balance sheet.
Answer:
Old ratio = \(60,000 : 48,000 : 36,000 = 5:4:3\).
New Ratio of X and Z = \(3:2\).
Gaining share of X = \(\frac{3}{5} - \frac{5}{12} = \frac{11}{60}\).
Gaining share of Z = \(\frac{2}{5} - \frac{3}{12} = \frac{9}{60}\).
Gaining Ratio = \(11:9\).

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of the New Firm as on 31-12-2009:

Question. L, M and N were partners sharing profits as 50%,30% and 20% respectively. On March 31,2014 ,their Balance Sheet stood as follows:

On this date M retires and L and N agreed to continue on the following terms:
a) Firm’s goodwill was valued at Rs. 51,000 and it was decided to adjust M’s goodwill into capital accounts of continuing partners.
b) There is a claim for workmen’s compensation to the extent of Rs. 4,000. Investments are brought down to Rs. 15,000.
c) Provision for bad debts is to be reduced by Rs. 1,000.
d) M will be paid Rs. 8,200 in cash and balance will be transferred to his Loan Account which will be paid in 3 equal installments together with interest @ 10% p.a.
e) L’s and N’s capital will be adjusted in their new profit sharing ratio i.e.3:2 through cash accounts prepare necessary ledger accounts and Balance Sheet.
Answer:
Profit-sharing ratio = \(5:3:2\).
New profit-sharing ratio of L and N = \(3:2\).
Gaining ratio of L and N = \(1:2\).

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of the New Firm as on March 31, 2014:

Question. A, B and C were partners sharing profits in the proportion 5:3:2 respectively. The Balance sheet of the firm on 31st Dec 2014 was as follows:-

They had taken a joint life policy of the face value of Rs. 40,000. On 31st Dec.2014, its surrender value was Rs. 8,000. On this date B decided to retire and for this purpose:
a) Goodwill was valued at Rs. 30,000.
b) Fixed assets were valued at Rs. 60,000.
c) Stock was considered as worth Rs. 20,000.
B was to be paid through cash brought in by A and C in such a way as to make their Capitals proportionate to their new profit sharing ratio which was to be A 3/5 and C 2/5. The Joint life policy is not to appear in the Balance Sheet. Prepare Revaluation a/c, Capital Account and the Balance Sheet.
Answer:
New Ratio of A and C = \(3:2\). Gaining Ratio of A and C = \(3:2\).

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of the New Firm as on 31st Dec 2014:

Question. Vijay, Vivek and Vinay were partners in a firm sharing profits in 2:2:1 ratio. On 31.03.2006 Vivek retire from the firm. On the date of Vivek's retirement the balance sheet of the firm was as follows :

On Vivek’s retirement it was agreed that:
a) Premises will be appreciated by 5% and furniture will be appreciated by Rs. 2,000. Stock will be depreciated by 10%.
b) Provision for bad debts was to be made at 5% on debtors and provision for legal damages to be made for Rs. 14,400.
c) Goodwill of the firm is valued at Rs. 48,000.
d) Rs. 50,000 from Vivek’s Capital A/C will be transferred to his loan A/c and the balance will be paid by cheque.
Prepare revaluation a/c, partners’ Capital A/c’s And Balance Sheet of Vijay and Vinay after Vivek’s retirement.
Answer:
Old Ratio = \(2:2:1\).
Gaining Ratio of Vijay and Vinay = \(2:1\).

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of the New Firm after Vivek's retirement:

Question. A and B are partners sharing profits in the ratio of A \(\frac{3}{6}\), B \(\frac{2}{6}\) and transfer to reserve \(\frac{1}{6}\). Their Balance Sheet on 31st December 2014 was as follows:

B retires on 1st Jan 2015. The terms were:-
a) Goodwill is to be valued at Rs. 50,000.
b) Value of patents is to be increased by Rs. 3,000 but plant was found over-valued by Rs. 15,000.
c) Provision for doubtful debts should be 5% on Debtors and provision for discount should also be made on Debtors & creation at 3%.
d) Out of insurance which was entirely debited to profit and loss Account Rs. 870 be carried forward as unexpired insurance.
e) Investments were revalued at Rs. 16,000. Half of these investments were taken over by B.
f) There is a claim for workmen’s compensation to the extent of Rs. 5,000.
B was paid off in full. A borrowed the necessary money from the bank on the security of plant and stock to pay off B. Prepare Revaluation a/c, capital a/c of Balance Sheet of A.
Answer:
Old Profit Sharing Ratio = \(3:2\). Only A continues, so A gains B's entire share.
B's share of Goodwill = \(50,000 \times \frac{2}{5} = \text{Rs. } 20,000\), debited to A.

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of A as on 1st Jan 2015:

Question. X, Y, and Z were in partnership sharing profits in the ratio of \(3:2:1\) they had taken a Joint life policy of Rs. \(50,000\) , whose surrender value on 1st Jan 2015 was Rs. \(18,000\) . On this date B/S is as follows:-

Z retires on the above date and the new profit sharing ratio between X and Y will be \(5:4\) following terms were agreed:
a) Land and buildings be reduced by 10%.
b) Out of the Insurance premium paid during the year Rs. 5,000 be carried forward as unexpired.
c) There is no need of any provision for doubtful debts.
d) Goodwill of the firm be valued at Rs. 36,000 and adjustment in this respect be made without raising a goodwill a/c . The joint life policy was also not to appear in the Balance sheet.
e) X and Y decided that their Capital will be adjusted in their new profit sharing ratio by bringing in or paying cash to the partners is a/c will be transferred to his loan a/c.
Pass necessary journal entries & prepare the capital accounts and the new balance sheet.
Answer:
Old profit sharing ratio of X, Y and Z = \(3:2:1\).
New ratio between X and Y = \(5:4\).
Gaining ratio of X and Y:
- Gain of X = \(\frac{5}{9} - \frac{3}{6} = \frac{10 - 9}{18} = \frac{1}{18}\).
- Gain of Y = \(\frac{4}{9} - \frac{2}{6} = \frac{8 - 6}{18} = \frac{2}{18}\).
Gaining Ratio = \(1:2\).
Z's share of Goodwill = \(36,000 \times \frac{1}{6} = \text{Rs. } 6,000\).
Z's share of JLP surrender value = \(18,000 \times \frac{1}{6} = \text{Rs. } 3,000\).

Revaluation Account:

Partners' Capital Accounts:

Balance Sheet of the New Firm as on 1st Jan 2015: