accounting and need to help me learn.
X, Y and Z are partners sharing profits in the ratio of their capitals. Y retired from the firm on 31st December, 2020, the date on which the balance sheet of the firm was as follows Liabilities :- Sundry creditors 5000 Bills payable 2500 Outstanding salary 500 Capital account: X-30000 Y-24000 Z-18000 Total-80000 Assets Cash at bank 6400 Debtors 6000 Provision-400=5600 Stock-10000 Machinary-28000 Land and building -30000 The following adjustments were made: (1) Building appreciated by 20%, (1) Stocks depreciated by 10%. (1) Provision for doubtful debts was to be 5% y (N) A Provision for legal charges payable was to be made at 7 900 (V) Goodwill of the firm is valued at 712,000 (vil)24,000 from Y’s capital account be transferred to his loan account and the balances be paid by cheque. (vil) New profit sharing ratio of X and Z to be 3:2. Give necessary ledger accounts and the balance sheet of the firm after Y’s retirement
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To prepare the ledger accounts and the balance sheet of the firm after Y’s retirement, we need to make the necessary adjustments and entries based on the given information. Let’s go step by step:
Building Appreciation: The building has appreciated by 20%. So, we need to increase its value. Building Account: Debit: Building (20% of 30,000) = 6,000 Credit: Building Appreciation Reserve = 6,000
Stock Depreciation: The stock has depreciated by 10%. So, we need to decrease its value. Stock Account: Debit: Stock Depreciation = 1,000 Credit: Stock (10% of 10,000) = 1,000
Provision for Doubtful Debts: The provision for doubtful debts needs to be 5% of the debtors’ value. Provision for Doubtful Debts Account: Debit: Provision for Doubtful Debts (5% of 6,000) = 300 Credit: Debtors = 300
Provision for Legal Charges: A provision for legal charges payable needs to be made at 7,900. Provision for Legal Charges Account: Debit: Legal Charges Expense = 7,900 Credit: Provision for Legal Charges Payable = 7,900
Transfer from Y’s Capital to Loan Account: 24,000 from Y’s capital account needs to be transferred to his loan account. Y’s Capital Account: Debit: Y’s Loan Account = 24,000 Credit: Y’s Capital Account = 24,000
Now, let’s calculate the new capital balances for X and Z based on the new profit sharing ratio of 3:2.
X’s New Capital: X’s Capital (30,000) + Share of Goodwill (712,000 * 3/5) = 30,000 + 427,200 = 457,200
Z’s New Capital: Z’s Capital (18,000) + Share of Goodwill (712,000 * 2/5) = 18,000 + 284,800 = 302,800
Now, we can prepare the ledger accounts and the balance sheet.
Ledger Accounts:
Sundry Creditors Account: Credit: Sundry Creditors = 5,000
Bills Payable Account: Credit: Bills Payable = 25,000
Outstanding Salary Account: Credit: Outstanding Salary = 500
Capital Accounts: X’s Capital Account: Debit: Y’s Loan Account = 24,000 Debit: Goodwill = 427,200 Credit: Capital (30,000) = 30,000 Credit: X’s Share of Goodwill = 427,200
Z’s Capital Account: Credit: Capital (18,000) = 18,000 Credit: Z’s Share of Goodwill = 284,800
Building Account: Debit: Building Appreciation Reserve = 6,000
Stock Account: Debit: Stock Depreciation = 1,000
Provision for Doubtful Debts Account: Debit: Provision for Doubtful Debts = 300
Provision for Legal Charges Account: Debit: Legal Charges Expense = 7,900
Cash at Bank Account: Debit: Y’s Loan Account = 24,000 Debit: Balance (6,400) = 6,400 Credit: Cheque to Y = 30,400
Debtors Account: Debit: Provision for
X, Y and Z are partners sharing profits in the ratio of their capitals. Y retired from the firm on 31st December, 2020, the date on which the balance sheet of the firm was as follows Liabilities :- Sundry creditors 5000 Bills payable 25000 Outstanding salary 500 Capital account: X-30000 Y-24000 Z-18000 Total-80000 Assets Cash at bank 6400 Debtors 6000 Provision-400=5600 Stock-10000 Machinary-28000 Land and building -30000 The following adjustments were made: (1) Building appreciated by 20%, (1) Stocks depreciated by 10%. (1) Provision for doubtful debts was to be 5% y (N) A Provision for legal charges payable was to be made at 900 (V) Goodwill of the firm is valued at 12,000 (vil)24,000 from Y’s capital account be transferred to his loan account and the balances be paid by cheque. (vil) New profit sharing ratio of X and Z to be 3:2. Give necessary ledger accounts and the balance sheet of the firm after Y’s retirement [Profit of Revaluation 4.200, Total amount due to Y on retirement 29,400 Transferred to his Loan Account 24,000. Amount paid by cheque 5,400 Total of Balance Sheet 79,700)]
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