A and B share profits in the proportions of 34 and 14. Their balance sheet on Dec 31, 2016 was as follows.
Balance Sheet of A and B as on December 31, 2016
Liabilities Amt. (Rs) Assets Amt.
(Rs)Sundry Creditors= 41,500
Cash at Bank=26,500
Reserve Bank =4,000
Bills receivable = 3,000
Capital Accounts
A = 30,000
B = 16,000
Debtors16,000
Stock = 20,000
Fixtures = 1,000
Land and Building = 25,000
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯91,500––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯91,500––––––––
On Jan 1, 2007, C was admitted into partnership on the following terms
(a) That C pays Rs. 10.000 as his capital.
(b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.
(c) That stock and fixtures be reduced, by 10% and 5%, provision for doubtful debts be created on sunday debtors and bills receivable.
(d) That the value of land and building be appreciated by 20%.
(e) There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created.
(f) An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence, should be written back.
Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet
