INSOLVENCY OF PARTNERSHIP INSOLVENCY OF ONE PARTNER 1 XY

insolvency of partnership insolvency of one partner 1. x,y and z sharing profits in 1/2, 1/3 and 1/6th respectively de

INSOLVENCY OF PARTNERSHIP
INSOLVENCY OF ONE PARTNER
1.
X,Y and Z sharing profits in 1/2, 1/3 and 1/6th respectively
decided to dissolve the firm from 1-1-2002, when their Balance
Sheet was as follows:
Liabilities
Amount
Assets
Amount
Creditors
40000
Land and Buildings
57000
B/P
7000
Stock
50000
X’s Loan A/c
10000
Sundry Debtors
50000
X’s Capital A/c
90000
Bank
3000
Y’s Capital A/c
10000
Y’s Current A/c
2000
Z’s Capital A/c
10000
Z’s Current A/c
5000
X’s Current A/c
1500
P. & L. A/c
1500
Total
1,68,500
1,68,500
Land and Buildings were sold for Rs.40000 and Stock and Debtors
realized Rs.30000 and Rs.42000 respectively. Goodwill was sold for
Rs.600. The expenses on realization came to Rs.1200. Z is insolvent
and a dividend of 50 paise in the rupee’s is received from his estate.
Pass journal entries to close the books of the firm applying the
ruling in Garner vs. Murray and prepare necessary ledger accounts.
2.
A, B and C are partners, in a business dividing profits equally.
Their Balance Sheet at 31st March, 2002 is as follows:
Liabilities
Amount
Assets
Amount
Sundry Creditors
10000
Furniture
2100
Bills Payable
2000
Stock
15400
Capital Account
Sundry Debtors 18000
A 12000
Less: Provision for
Doubtful Debts 900
17100
B 900
C 1000
22000
C’s Current A/c.
5000
Current Account
Cash at Bank
1400
A 2000
B 2000
4000
Reserve Fund
3000
Total
41,000
41,000
C is insolvent and his estate pays Rs.1800 to the firm. The
partnership is consequently dissolved and Sundry Debtors, Stock and
Furniture realize Rs.23600. Sundry creditors were settled at Rs.8000.
You are required to prepare the necessary ledger account to close the
books of the firm in accordance with the decision in Garner vs.
Murray.
3.
The Balance Sheet of L, M and N who are equal partners showed as
follows on 31st December, 2001
Liabilities
Amount
Assets
Amount
Creditors
10600
Cash at Bank
900
Capital Account
Stock
17000
L 16700
Debtors
13000
M 10700
27400
Investments
4000
Reserve Fund
2400
Furniture
1000
Profit & Loss A/c
1500
Machinery
3000
N’s Capital A/c
3000
Total
41,900
41,900
The firm was dissolved on the date. The assets realized in follows:
Debtors 12500
Stock 17200
Investments 3800
Furniture 800
Machinery 2500
The creditors were paid off Rs.10540 in full settlement of their
claims. The expenses of dissolution amounted to Rs.60. Assuming N is
insolvent and is not able to bring in anything. Prepare the ledger
accounts in accordance with the decision in Garner Vs. Murray.
4.
X, Y and Z are partners sharing profits and losses in the ratio of
4:2:3. On 1st January, 2001, they agreed to dissolve the
partnership, their Balance Sheet was as follows:
Liabilities
Amount
Assets
Amount
Profit and Loss A/c.
4500
Buildings
45000
Reserve Fund
12600
Machinery
15000
Bills Payable
4100
Furniture
3700
Sundry Creditors
9000
Stock
19400
Loan from X
4000
Debtors
31000
Capital Accounts
Investments
24000
Z
3000
Bills Receivable
5600
Y
46000
Cash at Bank
6500
X
68000
Cash in hand
1000
Total
1,51,200
1,51,200
The assets realized: Investments Rs.20400; Bills Receivable and
Debtors Rs.28200; Stock Rs.14550; Furniture Rs.2050; Machinery
Rs.8600; Buildings Rs.26400. All the liabilities were paid off. The
cost of realization was Rs.600, Z had become bankrupt and Rs.1024 only
was recovered from his estate once and for all. Partners were finally
paid off. Show the realization account, the Bank account, and the
capital accounts of the partners
i.
when the capitals are not fixed
ii.
When the capitals are fixed
5.
The summarized Balance Sheet of A, B, C and D (who shared profits
and losses. In the ratio of 4:3:2:1) was as-follows on 31st March,
2002:
Liabilities
Amount
Assets
Amount
Sundry Creditors
20000
Cash
1000
Capital Account
Stock
8000
A 60000
Debtors
15000
B 40000
Plant and Equipment
80000
C 6000
106000
Goodwill
20000
Capital: D
2000
Total
1,26,000
1,26,500
The partners decide to wind up the business as C and D become
insolvent. A sum of Rs.1000 is realized from C's separate resources
while D has no separate assets or liabilities.
Stock and debtors realize Rs.4000 and Rs.9000. Plant and equipment are
sold for Rs.50000 while Goodwill is valueless. The costs of
realization amount to Rs.6000 while sundry creditors pave to be paid
their claims in full. One of creditors for Rs.6000 in the books of the
firm, actually claimed Rs.12000 and his claim was finally settled at
Rs.10000 by arbitration.
Close the books of the firm by showing the relevant important Ledger
Accounts.
6.
A, B, C and D are partners sharing profit in the ratio of 2:2:1:1.
Their Balance Sheet as on 31-12-2001 was as follows:
Liabilities
Amount
Assets
Amount
Capital Accounts
Fixed Assets
20,000
A 14,000
Debtors
10,000
B 12,000
Cash at Bank
2,000
C 2,000
29,600
Profit & Loss A/c
12,000
Creditors
12,000
Bills Payable
2,400
Total
44,000
44,000
On 1st Jan. 2002 the firm was dissolved. All the assets expect cash
were realized for Rs.24,800. Realization expenses were Rs.200. All the
liabilities were discharged book values. C became insolvent and he
could not bring anything from his private estate. Prepare the
dissolution accounts applying Garner Vs. Murray decision.
Practical Problems for Working:
Insolvency of a Partner:
7.
R, S and T are in partnership sharing profits and losses
three-sixths, two-sixths, and one-sixth respectively. The Balance
Sheet on the date of dissolution was as follows:
Balance Sheet of R, S, T
Liabilities
Amount
Assets
Amount
Creditors
38,500
Cash in Hand
9,860
R’s Loan
2,750
Sundry Debtors
30,560
R’s Capital A/c.
15,200
Stock
18,440
S’s Capital A/c.
11,200
Furniture
7,200
T’s Capital
1,590
Total
67,650
67,650
The assets realized:
Stock Rs.13,840, Furniture Rs.5,150 and Debtors Rs.29,200. The
Creditors were paid less discount Rs.250. T is insolvent and is unable
to bring in anything. The expenses of winding up were Rs.520. Show the
ledger accounts as per Garner Vs. Murray decision.
8.
Basant, Hemant and Sarat were partners in a firm sharing profit
and losses in the ratio of 4:3:3, respectively. The firm was
dissolved and Hemant was appointed to realize the assets and
distribute the proceeds. Hemant is to receive 5% commission on the
amount realized from sale of assets and to bear all expenses of
realisation.
The Balance Sheet on the date of dissolution was as under:
Liabilities
Amount
Assets
Amount
Creditors
59,000
Cash
1,500
Basant’s Capital
30,000
Debtors 45,500
Hemant’s Capital
20,000
Less: Provision 2,500
43,000
Stock
60,000
Sarat’s Capital
4,500
Total
1,09,000
1,09,000
Debtors realized Rs.35,000; Stock Rs.45,000; Goodwill Rs.2,000;
Creditors were paid Rs.57,500 in full settlement. In addition,
outstanding creditors Rs.500, were also paid. The expenses amounted to
Rs.600. Sarat is insolvent and brings Rs.3,000 only from his estate.
Show the Realisation Account, Cash Account and Capital Accounts of the
Partners.
9.
Lean, Stout and Thin were partners sharing profits and losses in
the ratio of 3:2:1. on 31st December, 2001 their balance Sheet was
as follows:
Liabilities
Amount
Assets
Amount
Creditors
30,000
Cash at bank
9,500
Bills Payable
5,000
Stock
15,500
Lean’s Loan A/c.
6,000
Sundry Debtors
32,000
Reserve Fund
12,000
Furniture
5,000
Profit and Loss A/c.
6,000
Plant and Machinery
21,000
Capital Accounts
Drawings
Lean
20,000
Lean 4,000
Stout
15,000
Stout 1,000
5,000
Thin’s Capital A/c.
6,000
Total
94,000
94,000
The assets realized as follows:
Stock 12,200
Debtors 30,100
Furniture 4,200
Plant and Machinery is taken over by Lean at Rs.18,000. A contingent
liability for Bill Receivable discounted materialized to the extent of
Rs.600. Realisation expenses amounted to Rs.600. Thin is insolvent but
his estate pays Rs.1,900.
Prepare necessary accounts to close the books of the firm:
a.
If the capitals are fixed
b.
If the capitals are flucating
10.
The following is the Balance Sheet of a firm as on 31st March,
1998
Liabilities
Amount
Assets
Amount
Creditors
204800
Bank
11000
P’s Loan A/c.
60000
Stock
128000
Q’s Loan A/c.
24000
Debtors
192120
P’s Current A/c.
42400
Plant and Machinery
57200
Q’s Current A/c.
5000
Land and Buildings
168000
R’s Current A/c.
19880
Capital Account
P 120000
Q 80000
R 40000
240000
Total
5,76,200
5,76,200
It was decided to dissolve the firm on that date. The assets excepting
bank balance realized Rs.453520. The firm had to pay Rs.3000 for an
outstanding bill not recorded earlier in the books. R became insolvent
and a sum of Rs.2000 was realized from his estate. Prepare necessary
ledger accounts to close the books of the firm as per Garner Vs.
Murray.
INSOLVENCY OF ALL PARTNERS
11.
X, Y and Z were partners. Their Balance Sheet stood as under on
the date when the firm was dissolved.
Liabilities
Amount
Assets
Amount
Sundry Creditors
60000
Sundry Assets
55000
Capital Account
Profit and Loss A/c
12000
A 22000
Y’s Capital A/c
25000
B 10000
32000
Total
92,000
92,000
The assets realized Rs.40000. The expenses of realization amounted to
Rs.1000. The position of the partners was a follows:
Private Estate Private Liabilities
Rs. Rs.
X 18000 20000
Y 12000 21000
Z 12000 10000
Prepare the necessary ledger accounts to close the books of the firm.
12.
The Balance Sheet of X, Y and Z who were sharing profs in 3/5th,
1/5th, and 1/5th stood as follows on 31st December, 2001, i.e.,
the dissolution.
Liabilities
Amount
Assets
Amount
Bank Overdraft
28,000
Cash in hand
500
Sundry Creditors
24,500
Bills Receivable
2,000
X’s Capital
75,00
Debtors
12,000
Z’s Capital
5,000
Stock
19,000
Plant and Machinery
16,000
Goodwill
5,000
Y’s Capital A/c.
10,500
Total
65,000
65,000
The Assets realized Rs.39,875 realisation expenses, were Rs.1,000.
Prepare necessary accounts assuming that all partners are insolvent
13.
X, Y and Z are partners sharing profits and losses in the ratio of
3:2:1. Below is their Balance Sheet as on 30th June, 2002 when
they decided to dissolve the firm:
Liabilities
Amount
Assets
Amount
Creditors
51,000
Fixed Assets
50,000
Depreciation Fund
7,000
Current Assets
X’s Loan
10,000
(including cash Rs.1,600)
19,100
X’s Capital A/c.
15,000
Z’s Capital A/c.
3,900
Y’s Capital A/c.
8,000
Profit and Loss A/c.
18,000
Total
91,000
91,000
The assets realized Rs.35,000. The position of the partner on the date
of the dissolution was as follows:
Private Estate Private Liabilities
Rs. Rs.
X 9,000 7,500
Y 4,000 5,000
Y was able to pay 20 paise in the rupee of what was payable on his
account to the partnership. The expenses of realisation amounted to
Rs.500. Prepare ledger accounts assuming that all entries relating to
dissolution are passed though the Realisation Account.
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