Mohit, Ali and John are partners in a firm, sharing profits and losses in the ratio of 3 : 1 : 1. Their Balance Sheet as at 31 st March, 2018, was as follows :
Mohit retired on 1st April, 2018, subject to the following adjustments :
(a) Goodwill of the firm to be valued at Rs 20,000.
(b) Mohit to take over the investments at the market value.
(c) 25% of the General Reserve to be transferred to Provision for Doubtful Debts and the balance to be distributed amongst all the partners.
(d) Creditors to be paid Rs 3,000 less.
(e) Investment Fluctuation Fund not to be distributed. For this, it was decided that the remaining partners would compensate the retiring partner through their capital accounts.
(f) Mohit to be paid Rs 20,000 immediately on retirement and the balance to be transferred to his loan account.
You are required to :
(i) Pass journal entries on the date of Mohit ‘s retirement.
(ii) Prepare the Balance Sheet of the reconstituted firm.
