DEATH OF A PARTNER

Q.1. Mohan and Sohan were partners sharing profits and losses in the ratio
of 3:2.Mohan died on 14.3.2014.On that date goodwill was valued at
Rs.150000. There is a general reserve of Rs.50000 and an unrecorded asset
of Rs.40000. There was a joint life policy of Rs.200000whose surrender value
of Rs.80000 which appeared in the last balance sheet. The sales up to the
date of death are Rs.600000 and the firm earns a profit of 10% on the sales .
Mohans capital appears at Rs.250000in the last balance sheet on
31.12.2013. Find out the total amount payable to Mohans executors and
prepare Mohans account.
Q.2.A and B are partners sharing profits and losses in the ratio of 3:2.They
had a joint life policy of Rs.120000. The annual premium of the policy
Rs.5000 was debited to the profit and loss account. B died 4 months after
the date of the last balance sheet.The partnership deed provided that in the
event of death of a partner his executors were entitled to the following:
1. His capital as per the last balance sheet.
2. interest on capital at 6%p.a.
3. His share of profit to the date of death based on previous years profit
4.His share of joint life policy.
5. His share of goodwill based on mutually agreed valuation.
His capital as per last balance sheet was Rs.230000. His drawings for the 4
months after last balance sheet was Rs.30000. Interest was to be charged on
drawings at 3% irrespective of the period. The profit earned during the last
year was Rs.180000. The goodwill of the firm was valued at Rs.600000 on
the day of Bs death Prepare Bs capital account and show the amount due to
the executors of B.
Q.3.The balance sheet of A,B and C was as follows on 31.3.2014
LIABILITIES
As capital
Bs capital
Cs capital
Creditors
Reserve Fund

25000
20000
20000
35000
20000

ASSETS
Machinery
Debtors
Investments
Stock
Bills Receivable
Cash in Hand

30000
10000
40000
20000
2000
18000

120000
120000

They shared profits and losses in the ratio of 5:3:2. C died on June 12, 2014.
His executors were entitled to the following:
1.
2.
3.
4.

His capital as per the last balance sheet.

His share of the Reserve
His share profit based on the profits of the last 3 years + 20%
His share of goodwill based on 4 years purchase of the average profits
of the last 3 years which were Rs.80000, Rs.90000 and Rs.40000 .
His drawings up to the date of death amounted to Rs.10200. The
Investments were sold for Rs.40000 and Cs executors were paid. Pass
necessary journal entries and show Cs Executors account.

Q.4. . The Balance sheet of X , Y and Z , sharing profits and losses in the ratio
of 3:3:4, on 31.3.2014 were as follows:
Liabilities
General reserve
Bills payable
Loan
Capitals:
X
Y
Z

Amt
20000
10000
24000

Assets
Cash
Stock
Investments
Land & Building
Xs loan

Amt
32000
88000
94000
120000
20000

120000
100000
80000
354000
354000
X died on 30th June 2014 and his legal representative were entitled to the
following:
1. Goodwill of the firm was valued at 2 years purchase of the average
profits of the last 3 years . Average profits for the last 3 years were
Rs.84000.
2. Xs share of profits for the year till his date of death was to be
calculated on the basis of sales. Sales for the year ended 31st march
2013 was Rs. 800000 and from 1.4.2014 to 30.6.2014 to Rs.300000.
The profit for the year ended 31.3.2014 was Rs.200000
3. Interest on capital at 6% p.a
Prepare Xs capital account showing the final amount due to Xs
executors who decided to contribute this amount to an orphanage.
Also identify the value being highlighted in this question