A, B & C were partners in a firm sharing profits & losses in proportion to their fixed capitals. Their Balance Sheet as at March 31, 2017 was as follows:

 

Balance Sheet as at March 31, 2017
Liabilities
Amount (Rs.)AssetsAmount (Rs.)
Capitals: Bank21,000
A                                                                                           5,00,000 Stock9,000
B                                                                                           3,00,000 Debtors 15,000 
C 2,00,00010,00,000Less: Provision for Doubtful Debts 1,50013,500
General Reserve75,000A’s Loan35,500
Creditors23,000Plant & Machinery2,00,000
Outstanding Salary7,000Land & Building6,00,000
B’s Loan15,000Profit & Loss Account (For the year ending 31st March 2017)2,41,000
Total11,20,000Total11,20,000

 

On the date of above Balance Sheet, C retired from the firm on the following terms:

(i) Goodwill of the firm will be valued at two years purchase of the Average Profits of last three years. The Profits for the year ended March 31, 2015 & March 31, 2016 were Rs. 4,00,000&Rs. 3,00,000 respectively.

(ii) Provision for Bad Debts will be maintained at 5% of the Debtors.

(iii) Land & Building will be appreciated by Rs. 90,000 and Plant & Machinery Will be reduced to Rs. 1,80,000.

(iv) A agreed to repay his Loan.

(v) The loan repaid by A was to be utilized to pay C. The balance of the amount payable to C was transferred to his Loan Account bearing interest @ 12% per annum.

Prepare Revaluation Account, Partners’ Capital Accounts, Partners’ Current Accounts and the Balance Sheet of the reconstituted firm.

Marks-8, CBSE:2017-18/Sample/Q-17*

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