A and B are in partnership sharing profits and losses in the ratio 3 : 2. They insure their lives jointly for Rs 75,000 at an annual premium of Rs 3,500 to be debited to the business. B died three months after the date of the last Balance Sheet. According to the partnership deed the legal personal representatives of B are entitled to the following payments:
(a) his capital as per the last Balance Sheet; (b) interest on above capital @ 3 per cent per annum to the date of death;
(c) his share of profits to the date of death calculated on the basis of last year’s profits; and (d) his drawings are to bear interest at an average rate of 2% on the amount irrespective of the period. The net profits for the last three years, after charging insurance premium, were Rs 20,000, Rs 25,000 and Rs 30,000 respectively. B’s capital as per last Balance Sheet was Rs 40,000 and his drawings to the date of death were Rs 5,000. Draw B’s Account to be rendered to his representatives.
Q294. A, B and C carried on business in the partnership sharing profits as 3 : 2 : 1. The Balance Sheet on 31st December, 2014 showed their capitals to be : A Rs 10,400; B Rs 5,000; C Rs 3,000. On 28th February, 2015 A died and you are required to prepare necessary accounts for presentation to his executors having regard to the following facts :
(i) The firm had insured the partners’ lives severally, A for Rs 9,000; B for Rs 4,800; and C for Rs 2,400. The premiums have been charged to Profit and Loss Account and the surrender value on 28th February 2015 amounted in each case to one-fourth of the sum assured;
(ii) Capital carried interest at 5% p.a.;
(iii) A’s drawings from 1st January, 2015 to the date of his death amounted to Rs 1,200;
(iv) A’s share of profits for the portion of the current financial year for which he lived was to be taken at the sum calculated on the average of the last three completed years and Goodwill was to be valued on the basis of two years’ purchase of the average profits of those three years. The annual profits were Rs 9,200; Rs 7,400 and ~ 8,600 respectively.
