Assignment-Chapter : Retirement and Death of a Partner(Class XII)

• State the meaning of gaining ratio in reference to retirement of a partner?
• In which ratio the goodwill of the outgoing partner is compensated by the remaining partners?
• When does profit sharing ratio of remaining partners as same as gaining ratio at the time of retirement of a partner?
• A, B and C are partners sharing profits and losses in the ratio 5:3:2. C retires from the firm and his share of goodwill of Rs 8,000 is to be paid by A and B privately in the gaining ratio. What treatment will be made?
• A, B and C were partners sharing profits and losses in the ratio 5:3:2. C died on April 01, 2010.

As per the partnership deed, the deceased partner’s share of profit from the beginning of accounting year to the date of death is to be calculated on the basis of average profit of the immediate three preceding years. Profits of the last three years before the death of C were Rs 10,000, Rs 15,000 and Rs 20,000, respectively. Pass the necessary Journal entries for the profit share to be given to the deceased partner.

• Calculate different ratios for each of the following cases.  

(a)     P, Q and R are partners sharing profits and losses in the ratio 5:3:2. Q retires from the firm and he sells his share to P and R in the ratio 2:1. Calculate gaining ratio and new ratio?

(b)     M, N and O are partners in the ratio 2:2:1. N retires from the firm and he sells his entire share to M. O also sells1/4 of his share to M. Calculate new ratio and sacrificing ratio.

(c)     D, E and F are partners sharing profit in the ratio 7:3:5. F retires from the firm. D and E decided to share future profit equally after F’s retirement. Calculate gaining ratio and sacrificing ratio.

• A, B and C are equal partners in a partnership firm. C decides to retire from the business. On C’s retirement, the Balance Sheet shows Goodwill of Rs 21,000, General Reserve Rs 15,000 Profit and Loss (Debit) Rs 9,000. The partners decided to value the existing goodwill at Rs 30,000.

Show the effect of Goodwill, General Reserve and Profit and Loss at the time of C’s retirement by passing necessary Journal entries. 

• X, Y and Z are partners sharing profits and losses in the ratio 6:5:4. Z retires from the firm and his share is acquired by X and Y equally. Goodwill already appears in the books of the firm is Rs 15,000. The remaining partners decided to revalue goodwill at Rs 30,000.

Show the treatment of goodwill by passing necessary Journal entries, if the capitals of the partners are fixed. 

• P, Q and R were partners sharing profits and losses in the ratio 2:2:1. Q died in an accident on May 1, 2010. As per the partnership deed, the deceased partners’ share will be given to his executor in the following manner:

(a)     His balance of capital.

(b)     His share of profit from the beginning of the accounting period till the date of death will be considered on the basis of previous year’s turnover.

(c)     His share in General Reserve and Accumulated Profit

(d)     His share of Goodwill.

(e)     The capital account of Q showed a credit balance of Rs 80,000 and his current account showed a debit balance of Rs 10,000. Sales Rs 3,00,000 was made evenly throughout the year 2009. Profit earned at 20% on sales.

(f)      On December 31, 2009, Balance Sheet showed General Reserve Rs 10,000 and Goodwill Rs 12,000.

(g)     Goodwill of the firm is equal to 20% of the previous year’s turnover.

(h)     Pass the necessary Journal entries and prepare Q’s Capital Account, Q’s Current and Q’s Executor’s Account, assuming that the partners want to show General Reserve and Goodwill without altering its values. The balance of Q’s executors will be transferred to his Loan Account.

• State any two circumstances when calculation of gaining ratio becomes inevitable.
• Can a partner retire from a firm during a year? If yes, then mention the clauses under which the partner can seek retirement?
• Who is entitled to receive the payment in case of death of a partner? A, B and C are partners in a firm sharing profits and losses in the ratio of 3:3:2. A retires and his share is acquired by B and C in the ratio of 1:2 Calculate the new profit sharing ratio.
• Alfa, Beta and Gama are partners in a firm sharing profits and losses equally. Gama retires from the firm. On the retirement of Gama, new profit sharing ratio between Alfa and Beta becomes 2:1. Goodwill of the firm is valued at Rs 3,00,000. Pass the necessary Journal entries for the treatment of goodwill.
• Sunil, Sanjay and Gagan were partners in a firm sharing profits and losses in the ratio of 3:2:1. On June 30, 2010 Sunil died. His capital was Rs 1,20,000. The goodwill of the firm was valued at Rs 1,20,000. His executor is entitled for the following receipts.
• Interest on Sunil’s capital at 10% per annum
• Salary of Rs 24,000 per annum
• Profit up to the date of Sunil’s death is to be calculated on the basis of the previous year’s profit of Rs 3,00,000.

The firm closes its books on March 31 every year. Calculate the amount payable to the Sunil’s Executor by preparing Sunil’s Capital Account.

• Mayank, Lalit, Chetan are partners in a firm sharing profits and losses in the ratio of 5:3:2. Lalit retires from the firm. The goodwill of the firm is valued at twice the average profits of past five years, which were Rs 2,00,000, Rs 3,00,000, Rs 2,50,000 (Loss), Rs 4,00,000, Rs 2,50,000. Calculate Lalit’s share of goodwill and show the treatment of goodwill by passing necessary Journal entry.
• Mohit, Akshay and Johny are partners sharing profits and losses in the ratio 3:2:1. On the date of Balance Sheet, the capital of Mohit, Akshay and Johny are Rs 2,00,000, Rs 1,00,000 and Rs 3,00,000, General Reserve Rs 3,00,000. On the same date, Johny retires and his capital balance after all adjustments is to be paid in cash. The whole amount of Johny’s capital is to be brought in by Mohit and Akshay in such a manner that their capitals are in proportion to their profit sharing ratio. Prepare Partners’ Capital Account.
• Vipin, Varun and Vijay are partners in a firm sharing profits and losses in the ratio 3:2:1. On March 31, 2010, the Balance Sheet of the firm is as follows:

Balance Sheet
Liabilities			Amount Rs	Assets	Amount Rs
Creditors			50,000	Cash	10,000
Bills Payable			30,000	Debtors	50,000
General Reserve			1,20,000	Stock	1,00,000
Capitals:				Plant and Machinery	3,00,000
Vipin		3,00,000		Building	2,80,000
Varun		2,00,000		Profit and Loss	60,000
Vijay		1,00,000	6,00,000
			8,00,000		8,00,000

Vijay retires on March 31, 2010 on the following terms:

(a)    Building to be valued at Rs 4,00,000.

(b)   Plant and Machinery to be depreciated by Rs 55,000.

(c)    10% provision to be created on Debtors.

Prepare Revaluation Account, Capital Account and Balance Sheet after Vijay’s retirement.