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The document outlines the financial situation of DJT Corporation, detailing the partners' capital accounts and the impact of Tony's death on the partnership. It specifies the arrangements for profit sharing, interest on capital, and the valuation of goodwill upon a partner's death. Additional information includes past profits, asset revaluation, and the immediate payment to Tony's executor.

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2 views2 pages

Question

The document outlines the financial situation of DJT Corporation, detailing the partners' capital accounts and the impact of Tony's death on the partnership. It specifies the arrangements for profit sharing, interest on capital, and the valuation of goodwill upon a partner's death. Additional information includes past profits, asset revaluation, and the immediate payment to Tony's executor.

Uploaded by

sainishilpi153
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Question 4

(a) Donna, Jenny and Tony are partners of DJT Corporation sharing profit and
losses in the ratio of 3:2:1. On 315t March, 2025, their Balance Sheet was as
under:

Liabilities Amount Assets Amout


()
Capital Accounts: Land and building 2,60,000
Donna 1,60,000Plant and Machinery 1,15,000
Jenny 1,88,000 Furniture and Fixture 80 000

Tony 1,20,000Joint Life Policy 60,000


General Reserve 1,44,000 Inventory 35,000
Trade Payables 38,000 Trade Receivables 48,000
Less: Provision for
Doubtful Debts (4.500) 43,500
Cash at Bank 56,500
Total 6,50,000 Total 6,50,000
Tony died on 31" May, 2025.
As per Partnership Deed the following arrangements were to be put into
effect:
() The remaining partners share profits and losses in the ratio of 3: 2.
(ü) The partners are allowed interest @ 10% p.a. on their capitals, but no
interest be charged on drawings.
(iüi) Upon the death of apartner, the Goodwill of the firm be valued at three
years' purchase of the average net profits (after charging interest on
capital) for the 4 years to 31" March preceding the death of a partner.
(iv) Goodwill to be Çrédited to deceased partner's capital account with her
share of goodwill, without using agoodwill account.
(V) Profits till the date of death to be ascertained on the basis of average
profit of previous four years.
Additional information:
(1) The profits/(loss) of the firm before charging interest oń capital were as
follows:
Year Amount ()
2021-22 Profit 1,46,600
2022-23 Profit 1,88,000
2023-24 Loss 69,200
2024-25 Profit 1,52,200
(2) Average capital during the preceding 4 years to 3 1" March preceding the
death of the partner may be assumed at 3,50,000.

(3) Upon the death of Tony, her capital occount is to be credited with her
share of profits, interest on capital etc. colculated tillthe date of death.
(4) After the death of Tony, 2,00,000 was received from insurance
company against Joint Life Policy.
(5) The Firm's assets were revalued as under
Land and Building valued at 3,00,000;
Plant and Machinery to be depreciated by 15% and Furniture &
Fixtures tobe depreciated by 10%;
Inventory was valued at 45,000;
Trade receivables are all considered good and no provision is
required.
(6) Amountpayable to executor of Tony was paid immediately.
You are required to prepare:
() Revaluation Account;
(i) Partners' Capitát Accounts after giving effect to the above
transactions, (10Marks)

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