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problem 1: P, Q and R are the partners sharing profits and losses in the ratio of 5:3:2. From 1st January, 2006, they decide to share the profits and losses in equivalent proportion. The partnership deed gives that in the event of any modification in profit sharing ratio, the goodwill must be valued at three year’s purchase of the average of five year’s profits. The profits and losses of the prior 5 years are:

Profits: 2001 - Rs. 60,000; 2002 Rs. 1,50,000; 2003 - Rs. 1,70,000; 2004 - Rs. 1,90,000.
Loss : 2005 - Rs. 70,000.

Provide the obligatory journal entry to record the above change.

problem 2: A company took a loan of Rs. 5,00,000 from the Bank and issued 10% debentures of Rs. 8,00,000 of  Rs. 100 each as a collateral security. Describe how you will deal with the issue of debentures in the books of company.

problem 3: Alpha Ltd. Consists of 5,000 8% Debentures of Rs. 100 each due for redemption on March31, 2007. Suppose that Debenture Redemption Reserve consists of a balance of Rs. 1,90,000 on that date. Record the essential entries at the time of redemption of debentures.

problem 4: What journal entries must be made for the issue of debentures in the given cases:

a) X Limited issued 30,000 12% Debentures of Rs. 100 each at par, redeemable at a premium of 5%.
b) Y Limited issued 50,000 12% Debentures of Rs 100 each at a premium of 5%, redeemable at par.

problem 5: A and B Share profits and losses in the ratio of 5:2. They have decided to dissolve the firm. Assets and external liabilities have been transferred to Realization account. Pass the journal entries to effect the given:

a) Bank Loan of Rs. 12,000 is paid off.
b) A was to bear all expenditures of realization for which he is given a commission of Rs. 400/-
c) Deferred Advertisement Expenditure account appeared in the books at Rs. 28,000.
d) Stock worth Rs. 1,600 was taken over by B at Rs. 1,200.
e) An unrecorded computer realized Rs. 7000.
f) There was an outstanding bill for repairs for Rs. 2000, which was paid off.

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  • Category:- Accounting Basics
  • Reference No.:- M97765

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