CreditorsReserve FundCapitals:ABC40,000 Goodwill25,000 Fixed AssetsStockSundry Debtors30,00025,000Cash at Bank15,00070,0001,35,00030,00060,00010,00020,00015,0001,35,000B died on June 15, 2017. According to the Deed, his legal representatives are entitled to:(a) Balance in Capital Account;(b) Share of goodwill valued on the basis of thrice the average of the past 4 year's profits;(c) Share in profits up to the date of death on the basis of average profits for the past 4 years;(d) Interest on capital account @ 12% p.a.Profits for the years ending on March 31 of 2014, 2015, 2016, 2017 respectively were Rs. 15,000, Rs.17,000, Rs. 19,000 and Rs. 13,000.B's legal representatives were to be paid the amount due. A and C continued as partners by takingover B's share equally. Work out the amount payable to B's legal representatives.tativos Re 44 1581
Question
CreditorsReserve FundCapitals:ABC40,000 Goodwill25,000 Fixed AssetsStockSundry Debtors30,00025,000Cash at Bank15,00070,0001,35,00030,00060,00010,00020,00015,0001,35,000B died on June 15, 2017. According to the Deed, his legal representatives are entitled to:(a) Balance in Capital Account;(b) Share of goodwill valued on the basis of thrice the average of the past 4 year's profits;(c) Share in profits up to the date of death on the basis of average profits for the past 4 years;(d) Interest on capital account @ 12% p.a.Profits for the years ending on March 31 of 2014, 2015, 2016, 2017 respectively were Rs. 15,000, Rs.17,000, Rs. 19,000 and Rs. 13,000.B's legal representatives were to be paid the amount due. A and C continued as partners by takingover B's share equally. Work out the amount payable to B's legal representatives.tativos Re 44 1581
Solution
To calculate the amount payable to B's legal representatives, we need to consider the following:
(a) Balance in Capital Account: B's capital account balance is Rs. 60,000.
(b) Share of goodwill: The average profit for the past 4 years is (15,000 + 17,000 + 19,000 + 13,000) / 4 = Rs. 16,000. The goodwill is valued at thrice the average profit, so it's 16,000 * 3 = Rs. 48,000. B's share of the goodwill is 1/3 of this amount, which is Rs. 16,000.
(c) Share in profits up to the date of death: B died on June 15, 2017, so he was alive for about 2.5 months of the financial year. The average profit for the past 4 years is Rs. 16,000, so the profit for 2.5 months would be (16,000 / 12) * 2.5 = Rs. 3,333.33. B's share of this profit is 1/3, which is Rs. 1,111.11.
(d) Interest on capital account: The interest on B's capital account is 12% per annum. So, the interest for 2.5 months would be (60,000 * 12 / 100) * (2.5 / 12) = Rs. 1,500.
Adding all these amounts together, the total amount payable to B's legal representatives is 60,000 + 16,000 + 1,111.11 + 1,500 = Rs. 78,611.11.
Similar Questions
These are summarized accounts maintained with debtors and creditors.1 puntoReceivablesAssetsLiabilitiesCapital
Accounting Standard-26 requires that goodwill is to be recorded in the books of accounts onlywhen money or money’s worth has been paid for it. At the time of admission, Vivaan, a newpartner was unable to bring in his share of goodwill in cash, so according to AccountingStandard-26 his:(a) Current A/c will be credited(b) Current A/c will be debited(c) Capital A/c will be debited(d) Capital A/c will be credited
In which type of account does Goodwill effect
What happens on the financial statements when Goodwill impairment increases by 100?
On 1 July 2020, Judds Ltd acquired all the share capital of Solace Ltd for a consideration of $950,000. At the date of acquisition, the fair value of the identifiable net assets of Solace Ltd is $800,000. After the acquisition, the board of directors of Judds Ltd decided to impair goodwill arising from the acquisition by $15,000 for the financial year ended 30 June 2021 and an additional $20,000 for the year ended 30 June 2022. The consolidation adjustment to record goodwill impairment on 30 June 2022 is:
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.