Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3 : 2 : 1. On March 31, 2017, Naman retires. The various assets and liabilities of the firm on the date were as follows: Cash Rs. 10,000, Building Rs.1,00,000, Plant and Machinery Rs. 40,000, Stock Rs. 20,000, Debtors Rs. 20,000 and Investments Rs. 30,000.
The following was agreed upon between the partners on Naman’s retirement:
1. Building to be appreciated by 20%.
2. Plant and Machinery to be depreciated by 10%.
3. A provision of 5% on debtors to be created for bad and doubtful debts.
4. Stock was to be valued at Rs.18,000 and Investment at Rs. 35,000.
Record the necessary journal entries to the above effect and prepare the revaluation account.