A, B and C were partners sharing profits/losses in the ratio of A 40%, B 35% and C 25%. The draft Balance Sheet of the partnership as on December 31, 2017 was as follows :B retired on December 31, 2017. A and C continued partnership sharing profits/losses in the ratio of A---- 60% and C---- 40%. It was agreed that the amount then remaining due to him, a sum of ₹80,000, should remain as loan to the partnership and the balance be carried forward as ordinary trading liability. The following adjustments were agreed to be made to the above mentioned Balance Sheet.

(a) ₹10,000 should be written-off from the premises;

(b) Plant and machinery were revalued at ₹58,000;

(c) Provision for doubtful debts to be increased by ₹1,200;

(d) ₹5,000 due to creditors for expenses had been omitted from the books of account;

(e) ₹4,000 to be written-off from stock; and

(f) Provide ₹1,200 for professional charges in connection with revaluation.

As per the deed of partnership, in the event of the retirement of a partner, goodwill was to be valued at an amount equal to one year’s purchase of the average profits of the preceding three years on the date of retirement. Before determining the said average profits, a notional amount of ₹80,000 should be charged for remuneration to partners.

The profits before charging such remuneration were: Year ended 31.12.2015 ---- ₹1,44,000; Year ended 31.12.2016 ---- ₹1,68,000; and Year ended 31.12.2017 ---- ₹1,88,200 (as per draft accounts).

It was agreed that for the purpose of valuing goodwill, the amount of profit for year 2017 be recomputed after charging the loss on revaluation in respect of premises and stock that unprovided, expenses (except professional expenses) and increase in provision for doubtful debts. The continuing partners decided to eliminate the Goodwill Account from their books.

You are required to prepare: (i) Revaluation Account; (ii) Capital Accounts (merging Current Accounts therein); (iii) B’s Account showing balance due to him; (iv) Balance Sheet of A and C as on January 1,2018.

Transcribed Image Text:

Sundry Creditors Bills Payable Loan from B Liabilities ₹ 30,000 Cash in Hand and at Bank 8,000 Stock 30,000 Assets Sundry Debtors Less: Provision for Doubtful Debts 34,000 6,000 ₹ 67,000 42,000 28,000