Michael, Jackson and John were partners in a firm sharing profits in the ratio of 3 : 1 : 1. On 31st March, 2017, they decided to dissolve their firm.
On that date their Balance Sheet was as follows:
Balance Sheet of Michael, Jackson and John as at 31.3.2017
Less: Provision for
Doubtful Debts 2,400
Stock in trade
It was agreed that:
(i) Michael was to take over Furniture at Rs. 2,600 and Debtors amounting to Rs. 40,000 at Rs. 34,400 and the Creditors of Rs. 10,000 were to be paid by him at this figure.
(ii) Jackson was to take over all the stock in trade at Rs. 14,000 and some of the other Sundry Assets at Rs. 28,800 (being 10% less than book value).
(iii) John was to take over the remaining Sundry Assets at 90% of the book value and assumed the responsibility for the discharge of the loan.
(iv) The remaining debtors were sold to a debt collecting agency for 50% of the book value. The expenses of dissolution Rs. 600 were paid by John.
Prepare Realisation Account, Bank Account and Partners’ Capital Accounts.