Chapter-6 DISSOLUTION OF A PARTNERSHIP FIRM

  1. What is meant by Dissolution of a partnership? [1]
  2. What is meant by Dissolution of a partnership firm? [1]
  3. What is Realisation Account? [1]
  4. In case of Dissolution of a firm, which liabilities are to be paid first? [1]
  5. Vinod and David were partners in a firm sharing profits in 3:2 ratio. On 28.2.2006, their firm was dissolved. On that date the balance in their capital accounts were : Vinod Rs.50,000 (Cr.), David Rs.12,500 (Dr.). There was a debit balance of Rs.37,500 in the profit and loss account. The General Reserve account had a balance of Rs.75,000. Dissolution resulted into a gain of Rs.1,87,500. [3]
  6. Pass the necessary journal entries for the following transactions on the dissolution of the firm of Mohan and Sohan after the various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
    1. Bank Loan Rs.60,000 was paid
    2. Stock worth Rs.80,000 was taken over by partner Sohan
    3. Partner Mohan paid a creditor Rs.20,000
    4. An asset not appearing in the books of accounts realized Rs.6,000
    5. Expenses of realization Rs.10,000 were paid by partner Sohan
    6. Profit on realization Rs.1,80,000 was distributed between Mohan and Sohan in 5:4 ratio. [3]

 

  1. X, Y and Z are partners in a firm sharing profits in the ratio of 3:1:1 respectively. Record necessary journal entries for the following transactions at the time of the dissolution of a firm:
    1. Realisation expenses amounting to Rs.5,000 have to be borne by Mr. X, one of the partners.
    2. An unrecorded asset costing Rs.9,000 was taken over by Y for Rs.7,800.
    3. Profit and Loss A/c was appearing on the asset side of balance sheet at Rs.70,000 [4

 

  1. SK, MK and RK commenced business on 1st April, 2008 with fixed capitals of Rs.2,00,000, Rs.1,60,000 and Rs.1,20,000 respectively. They agreed to share profits and losses in the ratio of 4:3:3. During the year 2008-09, they made a profit of Rs.1,12,000 before allowing interest on capital @10% p.a. The profit for the year 2009-10 was Rs.24,000 after allowing interest on capital. Each of the partners had drawn Rs.40,000 during this period 2008-10. The partners with mutual consent agreed to wind up the business operations. Creditors on that date were Rs.2,16,000. Assets realized Rs.8,40,000 and the expenses of realization were Rs.10,000. Prepare the Balance Sheet as on 31st March, 2010 and find out the profit or loss on realization. [4]

 

  1. RK and SK are in partnership sharing profits in the ratio of 2:3. On March 31, 2013, they agree to dissolve the business. Pass necessary journal entries at the time of dissolution of the firm to record the following:
    1. Realisation expenses amounted to Rs.3,000.
    2. Deferred revenue advertising expenditure appeared in the books at Rs.1,80,000
  • Debtors Rs.60,000 were taken over by RK for Rs.54,000
  1. An unrecorded asset of Rs.9,000 was taken over by SK
  2. Liabilities amounting to Rs.72,000 already transferred to Realisation Account, were settled at Rs.66,000.
  3. Loan to RK was adjusted through his capital account Rs.45,000 (6)

 

  1. Pass the necessary journal entries for the following transactions on the dissolution of the firm of Sudha and Shiva after the various assets (other than cash) and outside liabilities have been transferred to realization account:
    1. Sudha agreed to pay off her husband’s loan Rs.19,000
    2. A debtor whose debt of Rs.9,300 was written off in the books paid Rs.7,500 in full settlement
    3. Shiva took over all investments at Rs.13,300
    4. Sundry creditors Rs.10,000 were paid at 9% discount
    5. Realisation expenses Rs.3,400 were paid by Sudha for which she was allowed Rs.3,000
    6. Loss on realization Rs.9,400 was divided between Sudha and Shiva in 3:2 ratio

 

  1. In case of Dissolution of firm, which item on the liabilities side are to be paid last? [1]

 

  1. When an asset is taken over by a partner, why is his capital account debited? [1]

 

  1. X and Y are partners in a firm sharing profits in the ratio of 3:2. Mrs. X has given a loan of Rs.60,000 to the firm and the firm also obtained a loan of Rs.30,000 from Y. The firm was dissolved and its assets were realised for Rs.75,000. State the order of payment of Mrs. X’s Loan with reason, if there were no creditors of the firm. [1]

 

  1. The partnership between AK and BK was dissolved on March 31,2014. Their capitals on that date were Rs.8,50,000 and Rs.1,50,000 respectively. Rs.5,00,000 was owed by the firm to AK, and BK owed to the firm Rs.1,00,000. Creditors on that date were Rs.10,00,000. The assets realized Rs.22,50,000 exclusive of what was owed by BK. find the profit or loss on realization. [3]
  2. Vinod, Mohan and David were partners in a firm sharing profits in the ratio of 4:3:3. The firm was dissolved. After the transfer of assets and external liabilities to Realisation Account, the following transactions took place:
    1. Khan, a creditor to whom Rs.18,000 were due to be paid, accepted office equipment at Rs.12,000 and the balance was paid to him in cash.
    2. Singh, a creditor to whom Rs.48,000 were due to be paid, tool over Machinery at Rs.60,000. Balance was paid by him in cash.
    3. An unrecorded liability of the firm Rs.23,400 was paid by Vinod
    4. The loss on dissolution was Rs.10,000. Pass necessary Journal entries for the above transactions in the books of the firm. [4]

 

  1. Pass the necessary Journal entries for the following transactions on the dissolution of the firm of David and Khan who were sharing profits and losses in the ratio of 2:1. The various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
    1. David agreed to pay off his brother’s loan Rs.10,000.
    2. Debtors realized Rs.12,000. (c) Khan took over all investments at Rs.12,000.
  • Sundry Creditors Rs.20,000 were paid at 5% discount.
  1. Realisation expenses amounted to Rs.2,000.
  2. Loss on realization was Rs.10,200. [6]

 

  1. Pass the necessary Journal entries for the following transactions on the dissolution of the firm of Tom and Poppy after the various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
    1. Bank Loan Rs.17,000 was paid
    2. Furniture worth Rs.35,000 was taken over by partner Tom at Rs.21,500
  • Partner Poppy agreed to pay a creditor Rs.3,750
  1. A Computer previously written off fuly, realised Rs.1,950
  2. Expenses of realisation Rs.1,600 were paid by partner Tom
  3. Profit on realisation Rs.2,400 was distributed between Tom and Poppy in 5:3 ratio. [6]

 

  1. George, Suraj and Gurmeet are partners. They decided to dissolve their firm. Pass necessary Journal entries for the following after various assets (other than cash and bank) and the third party liabilities have been transferred to Realisation Account:
    1. There were total book debts of Rs.38,000. A provision of bad and doubtful debts also stood in the books at Rs.3,000. Book debts Rs.6,000 proved bad and rest paid the amount due.
    2. George agreed to pay off his wife’s loan of Rs.3,500 at a discount of 5%.
  • Total creditors of the firm were Rs.20,000. Creditors worth Rs.5,000 were given a piece of furniture costing Rs.4,000 in full and final settlement. Remaining creditors allowed a discount of 10%.
  1. Suraj had given a loan of Rs.35,000 to the firm which was duly paid. [6]
  2. A Contingent liability (not provided for) of Rs.2,000 was also discharged.
  3. The firm had a debit balance of Rs.13,500 in the profit and loss account on the date of dissolution.

 

  1. Black, White and Green were partners in a firm. They decided to dissolve their firm. Pass necessary Journal entries for the following after various assets (other than cash and bank) and the third party liabilities have been transferred to Realisation Account:
    1. There was a stock of Rs.45,000. White took over 50% of the stock at 10% discount and remaining stock was sold at 40% profit on book value.
    2. P/L Account was showing a debit balance of Rs.7,500 which was distributed among the partners.
  • A Machinery which was not recorded in the books was sold for Rs.1,000.
  1. Black was paid only Rs.2,500 for his loan to the firm which amounted to Rs.2,750.
  2. Realisation Expenses amounting to Rs.2,500 paid by Green.
  3. There were 50 Shares of Rs.10 each in NTPC Ltd. Acquired at a cost of Rs.600 which had been written off completely from the books. These shares are valued @ Rs. 9 each and divided among the partners in their profit sharing ratio. (6)

 

  1. Pass the necessary Journal entries for the following transactions on the dissolution of the firm of King and Singh after the various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
    1. Bank Loan Rs.45,000 was paid
    2. Stock worth Rs.60,000 was taken over by a partner Singh
    3. King paid Rs.27,000 to a creditor
    4. A liability not appearing in the books of accounts settled Rs.11,100
    5. Expenses of realisation Rs.2,700 were paid by partner Singh
    6. Profit on realisation Rs.21,300 was distributed between KIng and Poppy in 7:3 ratio

 

 

 

 

 

 

 

  1. P and Q were partners in a firm sharing profits in the ratio of 3:2. On 31st March, 2011 their Balance Sheet was as follows:
Liabilities Amount Assets Amount
Creditors

Workmen Compensation Fund Capitals:

P’s Capital

Q’s Capital

1,00,000 1,60,000

 

1,60,000 1,40,000

Goodwill

Land and Building

Stock

Debtors

Bank

1,60,000 1,60,000 1,20,000 80,000

40,000

  5,60,000   5,60,000

On the above date the firm was dissolved.

(i) Creditors agreed to take over Land and Building at a valuation of their full claim.

(ii) Stock was taken over by Q at Rs.1,00,000 for cash

(iii) Bad debts proved Rs.10,000

(iv) Goodwill was found valueless

(v) Workmen Compensation claim was Rs.1,60,000

Prepare Necessary Accounts

 

  1. A, B and C are partners in a firm sharing profits in the ratio of 2:1:1. Their Balance Sheet as on 31st March, 2003 was as under:
Liabilities Amount Assets Amount
Creditors

Capitals:

A

B

C

1,00,000

 

1,60,000

1,60,000

1,20,000

Goodwill

Land & Building

Plant & Machinery Motor Car

Debtors

Cash

60,000

1,60,000

1,12,000

1,08,000

96,000

4,000

  5,40,000   5,40,000

The firm was dissolved on that date. The Assets realised: Goodwill Rs.40,000; Land & Building Rs.2,00,000; Plant & Machinery Rs.1,00,000; Motor Car Rs.56,000 and Debtors 50% of the book value. Realisation Expenses were Rs.4,000. Prepare Realisation Account, Partners capital accounts and cash account.

 

  1. Ram and Shyam were partners in a firm sharing profits in the ratio of 2:3. On 31.1.2005 Their Balance Sheet was as follows:
Liabilities Amount Assets Amount
Creditors

Bills Payable

Ram’s Capital S

hyam’s Capital

2,60,000

1,40,000

3,00,000

3,00,000

Land and Building Machinery

Goodwill

Stock

Debtors

Cash

4,80,000

2,60,000

40,000

1,00,000

80,000

40,000

 

  10,00,000   10,00,000

On the above date the firm was dissolved. Ram paid the creditors at a discount of 10% and Shyam paid bills payable in full. Assets realised: Land and Building 20% less; Machinery Rs.1,40,000; Stock 25% less; Debtors Rs.50,000. Expenses of realisation paid by Shyam were Rs.7,000. Prepare Realisation Account, partners capital accounts and cash account.

 

  1. AK, BK and CK were partners sharing profits in the ratio of 3:1:1. The Balance Sheet of the firm as on 31st January, 2007, was as follows:
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capitals :

AK       55,000

BK       20,000

CK       14,000

Creditors

Loan

 

 

 

89,000 12,000

3,000

Sundry Assets

Debtors                 48,400

Less: Provision    2,400

Stock

Furniture

Cash

34,000

 

46,000 15,600

2,000

6,400

  1,04,000   1,04,000

It was agreed that the firm be dissolved and :

(i) AK to take over furniture at Rs.1,600 and Debtors amounting to Rs.40,000 at Rs.34,400 and Creditors of Rs.12,000 were to be paid by him at this figure.

(ii) BK is to take over all stock at Rs.14,000 and some Sundry Assets at Rs.14,400 (being 10% less than the book value)

(iii) CK to take over remaining Sundry Assets at 90% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs.600.

(iv) The expenses of realisation were Rs.400.

(v) The remaining debtors were bad and not recoverable

Prepare necessary accounts at the time of dissolution.

 

  1. Following is the Balance Sheet of Vinod and Bobby on 31 December 2013:
Liabilities Amount Assets Amount
Creditors

Mrs. Vinod’s Loan

General Reserve

Investment Fluctuation Fund Capitals : Vinod      40,000

Bobby    40,000

1,20,000

20,000

40,000

4,000

 

80,000

Cash

Stock

Investments

Debtors               80,000

Less : Provision     8,000

Plant

 

52,000 20,000 40,000

 

72,000 80,000

  2,64,000   2,64,000

 

The firm was dissolved on 31st December 2013 on following items:

(a) Vinod promised to pay Mrs. Vinod’s Loan and took over stock at Rs.16,000

(b) Debtors Realised Rs.76,000

(c) Creditors payable after one month were paid immediately at 6% discount.

(d) Plant realised Rs.1,00,000 and Investment Rs.38,000

(e) Old Typewriter completely written off, estimated to realise Rs.1,200 is taken over by Bobby.

(f) Realisation Expenses Rs.4,000 paid by Vinod.

 

  1. The following is the Balance Sheet of A and B as on 31st March 2014:
Liabilities Amount Assets Amount
Creditors

Mrs. A’s Loan

Mrs. B’s Loan

Reserve

Capitals : A            10,000

B              8,000

38,000

10,000 15,000

5,000

 

18,000

Bank

Stock

Debtors

Furniture

Plant

Investment

Profit and loss A/c

11,500

6,000

19,000

4,000

28,000

10,000

7,500

  86,000   86,000

 

The firm was dissolved on 31st March 2014 and the assets and liabilities were settled as follows:

(i) A agreed to take the investments at Rs.8,000 and to pay off Mrs. A’s Loan

(ii) Other Assets were realised as follows: Stock Rs.5,000; Debtors Rs.18,500; Furniture Rs.4,500; Plant Rs.25,000.

(iii) Expenses on realisation amounted to Rs.1,600

(iv) Creditors agreed to accept Rs.37,000

The profits and losses were shared in the ratio of 3:2. You are required to prepre Realisation Account, Partners capital account and Bank account.

 

  1. A and B are partners sharing profits and losses in the ratio of 3:2. They dissolved the firm on 31st December, 2001 their balance sheet was as follows:
Liabilities Amount Assets Amount
Creditors

Bank overdraft

Reserve fund

P/L A/c

A’s Loan

Capitals:           A        30,000

B        30,000

A’s Current A/c

5,000

4,000

6,000

4,000

10,000

 

60,000

6,000

Customers 22,500

Less : Provision 2,500

Stock

Furniture

Motor Car

Cash in hand

B’s current A/c

Commission Receivable

 

20,000

45,000

10,000

15,000

1,000

3,000

1,000

  95,000   95,000

 

The assets realised are as follows:

  1. Debtors Rs.18,000, Stock Rs.40,000, Goodwill Rs.5,000.
  2. Motor car was taken over by ‘A’ for Rs.14,000 and funiture by ‘B’ for Rs.12,000
  3. Creditors were paid Rs.4,500 in full settlement.
  4. Commission receivable could not be recovered.
  5. The expenses of realisation were Rs.2,000 out of which 1,200 paid by firm and balance amount by A. Prepare Realisation Account, Partners Capital accounts and Cash Account.

 

  1. Following is the Balance Sheet of Vinod and Ramesh on 31st March 2014:
Liabilities Amount Assets Amount
Capitals:

Vinod 40,000

Ramesh 40,000

Creditors

Bills Payable

Bank overdraft

Mrs. Vinod’s Loan

Ramesh’s Loan

Investment Fluctuation Fund Employee Provident fund

General Reserve

 

 

80,000 40,000 40,000 20,000 40,000 20,000

5,600

2,400

4,000

Goodwill

Building

Plant and Fittings

Investment

Stock

Debtors                         34,000

Less : Provision              4,000

Bills Receivable

Cash at bank

Profit and Loss A/c

20,000 50,000 50,000 30,600 17,400

 

30,000 20,000 26,000 8,000

  2,52,000   2,52,000

It was agreed that:

  1. Vinod agreed to pay off his wife’s loan
  2. Debtors realised Rs.24,000
  3. Ramesh took away all the investments at Rs.24,000
  4. Other Assets realised as follows: Plant and fittings Rs.40,000; Building Rs.1,00,000; Goodwill Rs.12,000 e. Sundry Creditors and Bills payable were settled at 5% discount.
  5. Vinod Accepted stock at Rs.16,000 and Ramesh took over bills receivable at 20% discount.
  6. Realisation Expenses amounted to Rs.4,000.

Prepare necessary ledger accounts.

 

  1. Vinod and Kumar are partners in a firm with a profit sharing ratio of 3:2 respectively. They decided to dissolve the partnership on June 1, 2013. On that date their capitals stood as Rs.1,00,000 and Rs.50,000 respectively. Amount owed by Kumar to the firm was Rs.32,000 and there was a loan by Vinod for Rs.40,000; Creditors were Rs.2,50,000 and cash Rs.27,000. The remaining assets other than loan to Kumar and Cash, realised Rs.2,96,000. Realisation expenses amounted to Rs.10,000. Prepare Memorandum Balance Sheet as on 1 June 2013 and necessary ledger accounts to close the books of the firm. (6)
  2. KK, YY and ZZ commenced business on January 1, 2001 with capitals of Rs.2,00,000; Rs.1,60,000 and Rs.1,60,000 respectively. Profits are shared in the ratio of 4:3:3. Capitals carried interest at 5% p.a. During 2001 and 2002 they made profits of Rs.80,000 and Rs.1,00,000 (before allowing interest on capitals). Drawings of each partner were Rs.20,000 per year. On December 31, 2002 the firm was dissolved. Creditors on that date were Rs.48,000. The assets realised Rs.5,20,000 net. Prepare the necessary accounts to close the books of the firm.
  3. Vinod and K u m a r were partners in a firm sharing profits in the ratio of their capitals. On 31st March, 2013 their Balance Sheet was as follows :
Liabilities Amount Assets Amount
Creditors

Workmen Compensation Fund General Reserve

Vinod’s Current Account

Capitals:

Vinod’s Capital

Kumar’s Capital

3,00,000 6,00,000 1,50,000 50,000

 

20,00,000 10,00,000

Bank

Debtors

Stock

Furniture

Machinery

Kumar’s current A/c

4,00,000 6,80,000 3,00,000 9,20,000 16,40,000 1,60,000
  41,00,000   41,00,000

 

On the above date the firm was dissolved.

(i) Debtors were realised at a discount of 5%. 50% of the stock was taken over by V i n o d at 10% less than the book value. Remaining stock was sold for Rs. 1 , 3 0 ,000.

(ii) Furniture was taken over by K u m a r for R s . 2 ,70,000. Machinery was sold as scrap for R s . 1 , 4 8,000.

(iii) Creditors were paid in full.

(iv) Expenses on realisation Rs.16,000 were paid by V i n o d. Prepare Realisation Account.

 

  1. PK and RK were partners in a firm sharing profits in the ratio of 3:2. Inspite of repeated reminders by the authorities, they kept dumping hazardous material into a nearby river. The court order for the dissolution of their partnership firm on 31st March, 2012. PK was deputed to realise the assets and to pay the liabilities. He was paid Rs.2,000 as commission for his services. The financial position of the firm on 31st March, 2012 was as follows:
Liabilities Amount Assets Amount
Creditors

Mrs. PK’s Loan

RK’s Loan

Investment fluctuation fund Capitals:

PK’s Capital

RK’s Capital

1,60,000 80,000

48,000

16,000

 

84,000

84,000

Building

Investments

Debtors                  68,000

Less : Provision         8,000

Bills Receivable

Cash

Profit and Loss A/c

Goodwill

2,40,000 61,200

 

60,000 74,800 12,000 16,000

8,000

  4,72,000   4,72,000

Following was agreed upon:

(i) PK agreed to pay off his wife’s Loan

(ii) Debtors realised Rs.48,000

(iii) RK took away all investments at Rs.54,000

(iv) Building realised Rs.3,04,000

(v) Creditors were payable after 2 months. They were paid immediately at 10% discount.

(vi) Bills Receivable were settled at a loss of Rs.2,800

(vii) Realisation expenses amounted to Rs.5,000

Prepare Realisation Account, Partners capital accounts and cash account. Identify the value being conveyed in the question.

 

  1. VK and SK were partners sharing profits in the ratio of 3:1. On 31.3.2011 their Balance Sheet was as follows:
Liabilities Amount Assets Amount
Creditors

VK’s Capital

SK’s Capital

1,40,000 2,40,000 1,60,000 Land and Building

Machinery

Debtors

Bank

1,40,000 1,20,000 1,60,000 1,20,000
  5,40,000   5,40,000

The firm was dissolved on 1.04.2011 and the assets and liabilities were settled as follows:

(i) Creditors of Rs.1,00,000 took over land and building in full settlement of their calaim.

(ii) Remaining creditors were paid in cash

(iii) Machinery was sold at a depreciation of 30%

(iv) Debtors were collected at a cost of Rs.1,000

(v) Expenses of realisation were Rs.3,400

Pass necessary journal entries for dissolution of the firm.

 

  1. SN and SM were partners in a firm sharing profits in the ratio of 2:3. On 31.3.2011 their Balance Sheet was as follows:

 

Liabilities Amount (Rs.) Assets Amount (Rs.)
Capitals :           SN       4,00,000

SM      6,00,000

Creditors

Workmen Compensation Fund

 

 

10,00,000 2,10,000 2,00,000

Land and Building

Stock

Debtors

Bank

6,00,000

2,00,000

3,00,000

3,10,000

  14,10,000   14,10,000

 

The firm was dissolved on 1.4.2011 and the assets and liabilities were settled as follows:

(i) SN agreed to take over Land and Building at Rs.7,00,000 by paying cash.

(ii) Stock was sold for Rs.1,80,000.

(iii) Creditors accepted debtors in full settlement of the firm.

Pass necessary journal entries for dissolution of the firm.

 

 

  1. SK and MK were partners in a firm sharing profits in the ratio of 3:7. On 31.3.2011, their balance sheet of was as follows:

 

Liabilities Amount Assets Amount
Creditors

Profit and Loss A/c

Capitals : SK          6,00,000

MK        14,00,000

5,54,000 2,46,000

 

20,00,000

Land and Building

Machinery

Stock

Debtors

Bank

12,00,000 10,00,000 80,000 4,00,000 1,20,000
  28,00,000   28,00,000

 

The firm was dissolved on 1.04.2011 and the assets and Liabilities were settled as follows:

(i) Creditors accepted stock and debtors in full and final settlement of their claim.

(ii) Land and Building was sold for Rs.14,00,000 and Machinery was taken over by

MK by paying cash less than 30% of its book value.

Pass necessary journal entries for dissolution of firm.

 

  1. AK and VK were partners in a firm sharing profits in the ratio of 3:5. On 31.3.2011, their Balance Sheet was as follows:

 

Liabilities Amount Assets Amount
Creditors

Employee Provident Fund Capitals : AK      6,00,000

VK      10,00,000

3,58,000 42,000

 

16,00,000

Land and Building

Machinery

Debtors

Cash at Bank

8,00,000 6,00,000 4,44,000 1,56,000
  20,00,000   20,00,000

 

 

The firm was dissolved on 1.04.2011 and the assets and liabilities were settled as follows

(i) Land and Building realised Rs.8,60,000

(ii) Debtors realised Rs.4,50,000 (with interest) and Rs.2,000 were recovered for bad debts written off last year.

(iii) There was an unrecorded investment which was sold for Rs.50,000

(iv) VK took over Machinery at Rs.5,60,000 for cash

(v) 50% of the creditors were paid Rs.8,000

less in full settlement and the remaining creditors were paid full amount.

 

 

 

 

 

 

 

 

 

 

  1. Ram, Shyam and Mohan were partners sharing profits in the ratio of 2 : 2: 1. The Balance Sheet on 31.3.2012 when they dissolved the firm was as follows:

 

Liabilities Amount Assets Amount
Bank

Loan Creditors

 

 

Capitals: Ram           2,55,000

Shyam       2,20,000

Mohan          34,000

23,000

32,000

Other Sundry Assets

Furniture

Customers                  2,48,400

Less : Provision               2,400

Stock Cash

2,34,000 22,000

 

2,46,000 35,600

26,400

  5,64,000   5,64,000

 

It was agreed that :

  1. Ram to take over furniture at Rs.16,000 and debtors amounting to Rs.2,40,000 at Rs.2,34,400 and the creditors of Rs.32,000 were to be paid by him at this figure.
  2. Shyam is to take over all stock for Rs.34,000 and some sundry assets at Rs.1,44,000 (being 10% less than the book value)

iii. Mohan to take over remaining sundry assets at 80% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs.4,600.

  1. The expenses of realization were Rs.5,400. The remaining debtors were sold to a debt collecting agency at 50% of the value.

Prepare necessary accounts to close the books of the firm.

 

  1. Lucky, Boss and Chandu were partners sharing profits in the ratio of 3:1:1. Their Balance Sheet as on March 31st 2009, the date on which they dissolve their firm, was as follows:

 

Liabilities Amount Assets Amount
Capitals: Lucky          55,000

Boss            20,000

Chandu       14,000

Loan

Creditors

 

 

89,000

3,000

12,000

Sundry Assets

Stock

Debtors                       48,400

Less : Provision            2,400

Bills Receivables

Cash

34,000

15,600

 

46,000

2,000

6,400

  1,04,000   1,04,000

It was agreed that:

(a) Lucky to take over Bills Receivables at Rs.1,600, debtors amounting to Rs.40,000 at Rs.34,400 and the creditors of Rs.12,000 were to be paid by him at this figure.

(b) Boss to take over all stock for Rs.14,000 and some sundry assets at Rs.14,400 (being 10% less than the book value).

(c) Chandu to take over remaining sundry assets at 90% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs.600.

(d) The expenses of realization were Rs.540. The remaining debtors were sold to a debt collecting agency at 50% of the book value.

Prepare necessary Accounts.

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