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Partnership: Dissolution & Piecemeal
1. Dissolution [Decdember 2016] [Important]*******
P, Q, R and T have been carrying on business in partnership sharing profits and losses in the ratio of 4:1:2:3.
The following is their Balance Sheet as on 31st March, 2020:
LIABILITIES ₹ ₹ ASSETS ₹ ₹
Capital Accounts: Premises 2,80,000
P 7,00,000 Furnitures 30,000
T 3,00,000 10,00,000 Stock-in-Trade 2,00,000
Trade Creditors 3,00,000 Trade Debtors 3,50,000
Less: Provision for Bad Debts 50,000 3,00,000
Cash at Bank 1,40,000
Capital Accounts:
Q 2,00,000
R 1,50,000 3,50,000
13,00,000 13,00,000
It has been agreed to dissolve the partnership on 1st April, 2020, on basis of following points agreed upon:
(a) P is to take over Trade Debtors at 80 % of Book Value (₹ 3,50,000).
(b) T is to take over the stock in Trade at 95 % of the value.
(c) R is to discharge Trade Creditors.
(d) The realisation is : Premises ₹ 2,75,000 and Furnitures ₹ 25,000.
(e) The expenses of realisation come to ₹ 30,000.
(f) Q is found insolvent and ₹ 21,900 is realised from his estate.
Note: The loss arising out of capital deficiency may be distributed following decision in Garner vs. Murray.
On the basis of the information provided, answer the following questions:
Question 1 (a) : Pick up the option that is most appropriate:
What is the Total amount of realisation loss?
(A) 60,000
(B) 70,000
(C) 80,000
(D) 90,000
Question 1 (b) : Pick up the option that is most appropriate:
What is the amount of insolvency loss of Q?
(A) 1,85,100
(B) 1,85,000
(C) 2,07,000
(D) 2,07,100
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Question 1 (c) : Pick up the option that is most appropriate:
Insolvency loss of Q will be borne by:
(A) P, R & T in their Profit Sharing Ratio
(B) P & T in their Profit Sharing Ratio
(C) P, R & T in their Capital Ratio
(D) P & T in their Capital Ratio
Question 1 (d) : Pick up the option that is most appropriate:
What is the final amount payable to P:
(A) 2,90,430
(B) 1,50,000
(C) 54,470
(D) 2,62,430
Question 1 (e) : Pick up the option that is most appropriate:
What is the total of Cash & Bank Account?
(A) 5,24,900
(B) 4,61,900
(C) 5,24,000
(D) 4,61,000
2. Dissolution [June 2012]
Ram, Rahim and Robert are partners of the firm ABC & Co sharing profits and losses in the ratio of 5:3:2.
The Balance Sheet of the firm as on 01.04.2020 is given below:
Liabilities ₹ Assets ₹
Partners Capital: Goodwill 50,000
Ram 3,00,000 Machinery 4,55,000
Rahim 2,50,000 Furniture 10,000
Robert 2,00,000 Stock 2,00,000
General Reserve 1,05,000 Debtors 3,00,000
Loan 95,000 Cash & Bank 35,000
Sundry Creditors 1,00,000
10,50,000 10,50,000
Partners of firm decided to dissolve the firm. The firm decided to settle the loan creditors directly. Ram
took over goodwill for ₹ 75,000. Rahim took over machinery and furniture at 90 % of book value and sundry
creditors at book value.
Robert took over stock at 95 % of book value and debtors at 90 % of the book value. Partners have to pay
cash if the assets taken over had exceeded the amounts due to them.
Compute (a) Realisation Profit/Loss (b) Final Payment to Ram (c) Final Payment to Rahim (d) Final Payment
to Robert (e) Total of Cash & Bank
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3. Dissolution [June 2013]
Ram, Rahim and Robert are partners in a firm sharing profit and losses in the proportion of 3:3:2. Their
Balance Sheet as on 31.03.2020 was as follows:
Liabilities ₹ Assets ₹
Partners Capital Accounts: Bank 55,000
Ram 75,000 Stock 69,000
Rahim 75,000 Investments 6,000
Robert 1,00,000 2,50,000 Debtors 70,000
Land and Building 1,25,000
Partners Current Account: Goodwill 25,000
Ram 15,000
Rahim 25,000
Robert 12,500 52,500
Sundry creditors 47,500
3,50,000 3,50,000
They decided to dissolve the firm on 01.04.2020. They report the result of realization as follows:
Land and Buildings 90,000 – realized in cash
Debtors 60,000 – realized in cash
Investments 5,500 – taken over by Ram
Stock 75,500 – taken over by Rahim
Goodwill 18,000 – taken over by Robert
The realization expenses amounted to ₹ 2,000. Close the Accounts of the firm.
Compute (a) Realisation Profit/Loss (b) Final Payment to Ram (c) Final Payment to Rahim (d) Final Payment
to Robert (e) Total of Cash & Bank
4. Dissolution [June 2015]
A, B and C were equal partners in a firm. Their Balance Sheet as on 31st March, 2020 was as follows:
Liabilities ₹ Assets ₹
A’s Capital 1,60,000 Building 4,00,000
C’s Capital 1,00,000 Machinery 4,00,000
A’s Loan 2,00,000 Furniture and Fixtures 1,60,000
Creditors 10,00,000 Stock 1,60,000
Book Debts 2,00,000
Cash at Bank 10,000
B’s Capital (Overdrawn) 1,30,000
14,60,000 14,60,000
The firm was dissolved as all the partners were declared insolvent. The assets were realized as under:
Book debts : 45% less; Building : ₹ 1,60,000; Stock : ₹ 1,00,000; Machinery : ₹ 2,00,000; and Furniture and
fixtures: ₹ 40,000. Realization expenses were ₹ 10,000.
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The private assets and private liabilities of the partners were as follows:
Partner Private Assets (₹ ) Private Liabilities (₹ )
A 2,50,000 2,50,000
B 2,00,000 1,80,000
C 2,30,000 2,50,000
On the basis of the information provided, answer the following questions:
Question 4 (a) : Pick up the option that is most appropriate:
What is the Total amount of realisation loss?
(A) 6,00,000
(B) 7,20,000
(C) 2,40,000
(D) 7,00,000
Question 4 (b) : Pick up the option that is most appropriate:
What is the total of Cash & Bank Account?
(A) 6,40,000
(B) 6,00,000
(C) 6,30,000
(D) 6,20,000
Question 4 (c) : Pick up the option that is most appropriate:
What is the amount finally paid to creditors?
(A) 6,00,000
(B) 6,30,000
(C) 6,20,000
(D) 6,10,000
Question 4 (d) : Pick up the option that is most appropriate:
What is the total amount contributed by A to deficiency A/c (including A’s Loan) ?
(A) 1,20,000
(B) 2,40,000
(C) 80,000
(D) 2,00,000
Question 4 (e) : Pick up the option that is most appropriate:
What is the total amount of deficiency A/c?
(A) 4,90,000
(B) 4,80,000
(C) 4,70,000
(D) 4,60,000
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5. Dissolution [June 2019]
A, B and C were partners in a firm sharing profits & losses in the ratio of 3 : 1 : 1 agreed upon dissolution
of there partnership. They each decide to take over certain assets and liabilities and continue business
separately.
Balance Sheet as on date of dissolution
Liabilities Amount Assets Amount
(₹) (₹)
Creditors 6,000 Cash at Bank 3,200
Loan 1,500 Sundry Assets 17,000
Capitals: Debtors 24,200
A 27,500 Less: Bad Debts Provision 1,200 23,000
B 10,000 Stock 7,800
C 7,000 44,500 Furniture 1,000
52,000 52,000
It is agreed as follows:
(a) Goodwill is to be ignored.
(b) A is to take over all the Fixtures at ₹ 800; Debtors amounting to ₹ 20,000 at ₹ 17,200. The creditors
of ₹ 6,000 to be assumed by A at that figure.
(c) B is to take over all the stocks at ₹ 7,000 and certain of the sundry assets at ₹ 7,200 (being book
value less 10%).
(d) C takes over the remaining sundry assets at 90 % of book values less ₹ 100 allowances and assumes
responsibility for the discharge of the loan, together with accruing interest of ₹ 30 which has not
been recorded in the books of the firm.
(e) The expenses of dissolution were ₹ 270. The remaining debtors were sold to a debt collecting agency
for 50 % of book values.
On the basis of above information, you are required to answer the following questions:
Question 5 (a)
What is the amount of realisation from Sundry Assets by C?
(A) 8000
(B) 8720
(C) 8820
(D) 9000
Question 5 (b)
What is the amount collected from Debtors by the debt collecting agency?
(A) 1500
(B) 2100
(C) 4200
(D) 3500
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Question 5 (c)
What is the share of Profit/ Loss on Realisation?
(A) Share of Profit - A ₹ 5,760, B ₹1,920, C ₹1,920
(B) Share of loss - A ₹ 1,360, B ₹1,360, C ₹ 4,080
(C) Share of Profit - A ₹ 4,080, B ₹1,360, C ₹1,360
(D) Share of loss - A ₹ 4,080, B ₹1,360, C ₹1,360
Question 5 (d)
How did the firm settle the final amount with partner A?
(A) Receipt of 5,560
(B) Receipt of 11,420
(C) Payment of 14,120
(D) Payment of 11,420
Question 5 (e)
What is the total of both sides of Bank Account?
(A) 9,560
(B) 11,420
(C) 11,690
(D) 15,560
6. Dissolution [December 2017] [Not so Important]
Snehal, Suchita and Sindhu were partners sharing profits and losses in the ratio of 3 : 2 : 1. The firm
was dissolved on 31.03.2020. After transfer of assets and liabilities to Realisation A/c, the following
transactions took place. Give journal entries in the books on dissolution of the firm.
(a) Suchita's Loan to the firm ₹ 30,000 was settled at ₹ 28,500.
(b) A creditor for ₹ 50,000, took over Machinery of Book value ₹ 40,000 at ₹ 35,000. The balance
was settled in Cash.
(c) Workmen Compensation Reserve - ₹ 40,000. A liability equal to 60% of the Reserve was settled.
(d) Sindhu was to receive 5% of the value of assets realised as remuneration for completing the
dissolution work and was to bear realization expenses. Realisation expenses were ₹ 5,500 that
was paid by Sindhu. Assets realised ₹ 60,000.
(e) The Balance Sheet disclosed a footnote, contingent liability for ₹ 5,000 in respect of a bill
discounted. The bill was received from Megha. On the date of dissolution Megha was declared
insolvent and was not able to pay the amount due. The bill had to be met by the firm.
(f) Loss on realization amounted to ₹ 24,000.
What’s app me the answer sheet in PDF format at 8820696761
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