J, H and K were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31-03-2017, their balance sheet was as follows :
On the above date H retired and J and K agreed to continue the business on the following terms :
- Goodwill of the firm was valued at Rs 1,02,000.
- There was a claim of Rs 8,000 for workmen compensation,
- Provision for bad debts was to be reduced by Rs 2,000.
- H will be paid Rs 14,000 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly installments together with interest @ 10% p.a.
- The new profit sharing ratio between J and K will be 3 : 2 and their capital will be in their new profit sharing ratio.
The capital adjustments will be done by opening current accounts. Prepare Revaluation Account, Partners’ Capital Account and Balance Sheet of the new firm.
