A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2 . Their Balance Sheet as at 31st March, 2017 stood as follows:
They decided to share profits equally w.e.f 1st April, 2017. They also agreed that:
(i) Value of Land and Building be decreased by 5%.
(ii) Value of Machinery be increased. by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at Rs. 20,000 was unrecorded and is now to be recorded in the books.
(v) Out of Sundry Creditors, Rs. 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years purchase of last 3 years profits. Profits being for
2016-17 – Rs. 50,000 (Loss);
2015-16 – Rs.2,50,000 and
2014-15 – Rs. 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at a remuneration ( including expenses) of Rs. 5,000. Expenses came to Rs. 3,000. Pass journal entries and prepare Revaluation Account.