Anita, Gaurav and Sonu were partners in a firm sharing profits and losses in proportion to their capitals. Their Balance Sheet as at 31st March, 2019 was as follows:
Balance Sheet of Anita, Gaurav and Sonu as at 31st March, 2019
Land and Building
Less : Provision for
doubtful debts 10,000
Cash at bank
On the above date, Anita retired from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities as follows:
(i) Goodwill of the firm was valued at Rs. 3,00,000 and Anita’s share of goodwill was adjusted in the capital accounts of the remaining partners, Gaurav and Sonu.
(ii) Land and Building was to be brought up to 120% of its book value.
(iii) Bad debts amounted to Rs. 20,000. A provision for doubtful debts was to be maintained at 10% on debtors.
(iv) Market value of investments was Rs. 1,10,000.
(v) Rs. 1,00,000 was paid immediately by cheque to Anita out of the amount due and the balance was to be transferred to her loan account which was to be paid in two equal annual instalments along with interest @ 10% p.a.
Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm on Anita’s retirement.