TEST – DISSOLUTION, DEATH, SHARES AND DEBENTURES

1. Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on 1st April,
2023. Balance sheet of the firm as on that date was as follows:
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Creditors 40,000 Cash at Bank 12,000
Bills Payable 40,000 Investments 30,000
Loan by Naresh 44,000 Debtors 40,000
-PBDD (4,000) 36,000
Loan by Mrs. Yogesh 42,000 Bills Receivable 30,000
Advertisement Suspense A/c 1,00,000
Capital A/cs:
Yogesh 21,000
Naresh 21,000 42,000

2,08,000 2,08,000

The firm was dissolved on the following terms:

a) Yogesh was to pay his wife’s loan.
b) Debtors realized Rs.30,000.
c) Naresh was to take investments at an agreed value of Rs. 26,000.
d) Creditors and bills payable were paid @ 10% discount.
e) Bills receivable were received allowing 5% rebate.
f) A debtor previously written off as bad debts, paid Rs. 15,000.
g) An unrecorded asset realized Rs.10,000.
h) Realization expenses were paid by Naresh Rs. 10,000.
Prepare realization account.

2. X, Y and Z were partners in a firm sharing profits in 2:2:1 ratio. The Partnership Deed provided
that on the death of a partner his executors will be entitled to the following:
(a) Interest on Capital @ 12% p.a.
(b) Interest on Drawings @ 18% p.a.
(c) Salary of ₹ 12,000 p.a.
(d) Goodwill of firm will be valued at 2 years purchase of average profits of last three years.
(d) Share in the profit will be calculated on the basis of previous year.

X died on 31st May, 2023. His capital was ₹ 80,000. He had withdrawn ₹ 15,000 and
interest on his drawings was calculated as ₹ 1,200.
Prepare X’s capital A/c.
3. Sandesh Ltd. has an authorised capital of Rs. 30,00,000 divided into equity shares of Rs.10
each. The company invited applications for issuing 70,000 shares. Applications for 69,000 shares
were received. All calls were made and duly received except the first and final call of Rs. 2 per
share on 3,000 shares. These shares were forfeited.
(a) Show Share capital in the balance sheet of the company per Schedule III, Part I of the
Companies Act, 2013.
(b) Also prepare notes to accounts for the same.

4. Pass entries for forfeiture and reissue in both the following cases.
a) Climax Ltd. forfeited 200 shares of Rs. 10 each issued at a premium of 20% for non-payment
of allotment money of Rs. 5 (including premium) per share and the final call of Rs. 3 per share.
Out of these, 100 shares were re-issued to Krishan credited as fully paid for Rs. 9 per share.
Pass Journal entries to record the forfeiture and re-issue of shares.

b) X Ltd. forfeited 300 shares of ₹10 each on which ₹7 has been called and ₹5 has been paid. Out
of these, 100 shares are re-issued for ₹6 per share as ₹7 paid-up.

c) Y Ltd. forfeited 500 shares of ₹100 each, ₹75 called-up, issued at 10% premium (to be paid at
the time of allotment) for non-payment of the first call of ₹20 per share. Out of these, 200 shares
were re-issued as ₹75 paid- up for ₹60 per share.

5. Pass necessary journal entries for the following transactions relating to the issue of debentures

(a) KS Limited issued Rs. 10,00,000, 10% Debentures of Rs. 100 each at par, redeemable at
10% premium after four years.

(b) QR Limited issued Rs.10,00,000, 9% Debentures of Rs. 100 each at a discount of 10%,
redeemable at a premium of 5% after five years.

(c) Shovan Limited took over the assets of Rs. 60,00,000 and liabilities of Rs. 10,00,000 from
Swami Limited for an agreed purchase consideration of Rs. 45,00,000. The amount was
payable by issuing 10% debentures of Rs. 100 each at 25% premium. Pass necessary
journal entries for the above transactions in the books of Shovan Limited.

(d) Paid half yearly interest on 10,000 12% debentures of Rs. 200 each. Journalize.

(e) Issued Rs. 6,00,000 10% debentures of Rs. 100 each as collateral security to SBI against
loan of Rs. 8,0,000. Journalize.

(f) Raghav Limited purchased a running business from Krishna traders for a sum of Rs.
15,00,000 payable Rs. 3,00,000 by cheque and for the balance issued 9% debentures of Rs.
100 each at par. The assets and liabilities were: Plant and Machinery Rs. 4,00,000, Building
Rs. 6,00,000, Stock Rs. 5,00,000, Debtors Rs. 3,00,000, Creditors Rs. 2,00,000. Journalize
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7. PREPARE COMMON SIZE BALANCE SHEET