The Balance Sheet of X, Y and Z who were sharing profits in proportion to their capitals stood as follows at 31st March, 2018:
Y retires on 1st April, 2018 and the following readjustments were agreed upon:
(a) Out of insurance premium which was debited to the Profit and Loss Account Rs. 1,500 be carried forward as Unexpired Insurance.
(b) The Provision for Doubtful Debts be brought up to 5% o Debtors.
(c) The Land and Building be appreciated by 20%.
(d) A provision of Rs. 4,000 be made in respect of outstanding bills for repairs.
(e) The goodwill of the entire firm be fixed at Rs. 21,600. Y’s share of goodwill be adjusted to that of X and Z whoa re going to share in future profits in the ratio of 3 : 1. Pass necessary journal entries and give the Balance Sheet after Y’s retirement.
