3 Marks Question

Question 13 Marks

Bat, Cat and Rat were partners sharing profits and losses in the ratio 5:3:2. Cat retired and on that date there was a balance of Investment of ₹ 4,00,000 and Investment Fluctuation Reserve of ₹ 1,00,000 was appearing in the balance sheet.
Pass necessary journal entries for Investment Fluctuation reserve in the following cases.
(i) Market Value of Investments was ₹ 4,80,000.
(ii) Market Value of Investments was ₹ 3,80,000.
(iii) Market Value of Investments was ₹ 2,90,000

Answer

Journal
Date	Particulars			Debit	Credit
(i)	Investment Fluctuation Reserve A/c		Dr	1,00,000
		To Bat's capital A/c			50,000
		To Cat's capital A/c			30,000
		To Rat's capital A/c			20,000
	(Being Invest. Fluctuation Reserve distributed)
	Investment A/c		Dr	80,000
		To Revaluation A/c			80,000
	(Being Increase in investment recorded)
	Revaluation A/c		Dr	80,000
		To Bat capital A/c			40,000
		To Cat capital A/c			24,000
		To Rat capital A/c			16,000
	(Being Gain on revaluation transferred to partners)

(ii)	Investment Fluctuation Reserve A/c		Dr	1,00,000
		To Bat's capital A/c			40,000
		To Cat's capital A/c			24,000
		To Rat's capital A/c			16,000
		To Investment A/c			20,000
	(Being decrease in investment recorded and balance Invest. Fluctuation Reserve distributed)

(iii)	Investment Fluctuation Reserve A/c		Dr	1,00,000
	Revaluation A/c		Dr	10,000
		To Investment A/c			1,10,000
	(Being decrease in investment recorded)

	Bat's capital A/c		Dr	5,000
	Cat's capital A/c		Dr	3,000
	Rat's capital A/c		Dr	2,000
		To Revaluation A/c			10,000
	(Being Loss on revaluation distributed among the partners)

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Question 23 Marks

A company forfeited 8,000 shares of ₹ 10 each on which ₹ 8 were called (including ₹ 1 premium) and ₹ 6 was paid (including ₹ 1 premium). Out of these 5,000 shares were reissued at maximum possible discount. Pass necessary journal entries.

Answer

Journal
Date	Particulars			Debit	Credit
	Share Capital A/c		Dr	56,000
		To Shares Forfeited A/c			40,000
		To Calls in arrears A/c			16,000
	(Being Shares forfeited)
	Bank A/c		Dr	10,000
	Shares Forfeited A/c		Dr	25,000
		To Share Capital A/c			35,000
	(Being 5000 shares reissued at discount)

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Question 33 Marks

Buddha Limited took over assets of ₹ 40,00,000 and liabilities of ₹ 6,50,000 of Ginny Limited. Buddha Limited issued 30,000, 8% Debentures of ₹ 100 each at 10% discount, to be redeemed at 5% premium along with cheque of ₹ 5,00,000. Pass necessary journal entries in the books of Buddha Ltd.

Answer

Journal
Date	Particulars			Debit	Credit
	Assets A/c		Dr	40,00,000
		To Liabilities A/c			6,50,000
		To Ginny Ltd. A/c			32,00,000
		To Capital Reserve A/c			1,50,000
	(Being Business taken over and capital reserve recorded)
	Ginny Limited A/c		Dr	32,00,000
	Loss on Issue of Debentures A/c		Dr	4,50,000
		To 8% Debentures A/c			30,00,000
		To Premium on redemption of Debentures			1,50,000
		To Bank A/c			5,00,000
	(Being purchased consideration discharged)

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Question 43 Marks

Amit and Kartik are partners sharing profits and losses equally. They decided to admit Saurabh for an equal share in the profits. For this purpose, the goodwill of the firm was to be valued at four years' purchase of super profits.
The Balance Sheet of the firm on Saurabh's admission was as follows:

Liabilities		Amount (₹)	Assets	Amount(₹)
Capital Accounts			Fixed Assets (Tangible)	75,000
Amit	90,000		Furniture	15,000
Kartik	50,000	1,40,000	Stock	30,000
Creditors		5,000	Debtors	20,000
General Reserve		20,000	Cash	50,000
Bills payable		25,000
		1,90,000		1,90,000

The normal rate of return is 12% p.a. Average profit of the firm for the last four years was ₹ 30,000. Calculate Saurabh's share of goodwill.

Answer

Capital of Firm = 1,40,000 $+$ 20,000 (Reserve) = ₹ 1,60,000
Normal Profit = 1,60,000 $\times$ 12/100 = ₹ 19,200
Average Profit = ₹ 30,000
Super Profit = Average Profit $-$ Normal Profit = 30,000 - 19,200 = ₹ 10,800
Goodwill = 4 (Super Profit) = 4 (10,800) = ₹ 43,200
Saurabh's share of Goodwill = 1/3 of 43,200 = ₹ 14,400.

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Question 53 Marks

A, B and C were partners sharing profits, and losses in the ratio of 2:2:1. C died on 1st July, 2023 on which date the capitals of A, B and C after all necessary adjustments stood at ₹ 74,000, ₹ 6,750 and 42,250 respectively. A and B continued to carry on the business for six months without settling the accounts of C. During the period of six months from 1-7-2023, a profit of ₹ 20,500 is earned using the firm's property. State which of the two options available u/s 37 of the Indian Partnership Act, 1932 should be exercised by executors of C and why?.

Answer

(i) Share in the subsequent profits attributable to the use of his balance.
$\frac{ 42,250 \times 20,500}{ 1,80,000}$
= ₹ 4,812
(ii) Interest @ 6% p.a. on the use of his balance = ₹ 42,250 x 6/12 x 6/100 = ₹ 1,267.50
C should exercise option (i) since the amount payable to him under this option is more as compared to the amount payable to him under option (ii).

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Question 63 Marks

Rusting, a partner of a firm under dissolution was to get a remuneration 2% of the total assets realised other than cash and 10% of the amount distributed to the partners. Sundry assets (including Cash ₹ 8,000) realised at ₹ 1,16,000 and sundry liabilities to be paid ₹ 31,340. Calculate Rustings's remuneration and Show your workings clearly. Also pass necessary journal entry for remuneration.

Answer

Assets realised = ₹ 1,08,000
Commission @ 2% = ₹ 2,160
Amount payable to other partners = 1,16,000 - 31,340 = 84,660
10% of amount payable = 8,466
Total Commission = 2,160 + 8,460 = ₹10,626

Date	Particulars		Debit (₹)	Credit (₹)
(i)	Realisation A/c Dr.		10,626
		To Rusting's Capital Account		10,626
	(Being remuneration payable to partner).

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