The Balance Sheet of A, B and C, who were sharing profits in the ratio of 4:3:2 respectively stood as follows on9 31.12.2017 :

B having given notice to retire from the firm, the following adjustments in the books of the firm were agreed upon:

1. That the land and building be appreciated by 10%;

2. That the provision for bad and doubtful debts is no longer necessary;

3. That the stock be appreciated by 20%;

4. That the adjustment be made in the accounts to rectify a mistake previously made whereby B was credited in excess by ₹810, while A and C were debited in excess of ₹420 and ₹390 respectively.

5. That goodwill of the firm be fixed at ₹5,400 and B’s share of the same be adjusted to that of A and C who are going to share in future profits in the ratio of 2:1.

6. That the entire capital of the firm, as newly constituted, will be readjusted by bringing in or paying of cash so that the future capital of A and C be in the ratio of 2:1. Pass Journal entries and prepare the Balance Sheet of the new firm showing B’s balance as loan.

Transcribed Image Text:

Sundry Creditors Capital - A Capital - B Capital - C Liabilities ₹ 4,140 Cash at Bank 12,000 9,000 6,000 31,140 Sundry Debtors Less: Provision Stock Plant and Machinery Land and Building Assets 3,045 105 ₹ 3,300 2,940 4,800 5,100 15,000 31,140