Ativ, Meha and Nupur were partners sharing profits and losses in the ratio of 5 : 3 : 2.
On 31-3-2016, their Balance Sheet was as under:
Employees’ Provident Fund
Ativ retired on 1-4-2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was to be valued at 2 years’ purchase of the average profits of 3 completed years preceding the date of retirement. The profits for previous years were:
2013-14 Rs. 55,000; 2014-15 Rs. 65,000; 2015-16 Rs. 60,000.
(b) Fixed assets were to be increased by Rs. 25,000.
(c) Stock was overvalued by Rs. 5,000.
(d) Rs. 20,000 were immediately paid to Ativ and the balance was transferred to his loan account.
Prepare Revaluation account, Partners Capital Accounts and the Balance Sheet of the reconstituted firm.