Following is the balance sheet of A, B and C as at 31st March, 2017, who have agreed to share profits and losses in proportion of their capital.
On 31st March, 2017, A desired to retire from the firm and the remaining partners decided to carry on the business.
It was agreed to revalue the assets and reassess the liabilities on the following basis :
- Land and building to be appreciated by 30%.
- Machinery be depreciated by 20%.
- There were bad debts of Rs 17,000.
- The claim on account of workmen compensation was estimated at Rs 8,000.
- Goodwill of the firm was valued at Rs 1,40,000 and A’s share of goodwill be adjusted against the capital account of the continuing partners B and C who have decided to share future profits in the ratio of 4 : 3 respectively,
- Capital of the new firm in total will be the same as before the retirement of A and will be in the new profit sharing ratio of the continuing partners,
- Amount due to A be settled by paying Rs 50,000 in cash and the balance by transferring to his loan account which will be paid letter on.
Prepare Revaluation Account, Capital Account of partners and Balance Sheet of the firm after A’s retirement.
