A and B are partners in the firm, sharing profit in the ratio of 3 : 2. On 1st April, 2017, they admit C in new firm for 1/5 share in profit. Their balance sheet was as follows :
C was admitted on the following terms :
- C is to bring capital Rs 40,000 and goodwill Rs 15,000.
- Partners agreed to share the future profits in the ratio of 5 : 2 : 3.
- Investments will be appreciated by 20% and furniture depreciated by 10%.
- One customer who owed the firm Rs 2,000 becomes insolvent and nothing could be realized from him.
- Creditors will be written off Rs 2,000.
- Outstanding bills for repair Rs 1,000 will be provided for.
- Interest accrued on investment Rs 2,000.
- Capital of the partners shall be in proportion to their profits sharing ratio.
For this, adjustment be made through cash. Prepare Revaluation Account, Capital Accounts and the Balance Sheet of new firm.