G, E and F were partners in a firm sharing profits in the ratio of 7 : 2 : 1. The Balance Sheet of the firm as at 31st March, 2018, was as follows:
E retired on the above date. On E’s retirement the following was agreed upon:
(i) Land and Building were revalued at Rs. 1,88,000, Machinery at Rs. 76,000 and Stock at Rs. 10,000 and goodwill of the firm was valued at Rs. 90,000.
(ii) A provision of 2·5% was to be created on debtors for doubtful debts.
(iii) The net amount payable to E was transferred to his loan account to be paid later on.
(iv) Total capital of the new firm was fixed at Rs. 2,40,000 which will be adjusted according to their new profit sharing ratio by opening current accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of reconstituted firm.
Balance Sheet of G, E and F as at 31st March, 2018
|Liabilities||Amount (Rs.)||Assets||Amount (Rs.)|
|G 1,40,000||Sundry Debtors||24,000|
|Creditors||28,000||Land and Buildings||1,20,000|
|Loan from E||60,000|