Question

A and B are partners in the ratio 3:2. They admit C as a partner from 1st April 2014. A gives 1/3rd of his share and B gives 1/10th from his share to C. Their balance sheet as on 31st March 2014 is given below:

Terms of C's admission are as follows:
(a) C brings Rs.60000 as capital. His share of goodwill was Rs.36000. He could bring only 60% of his share.
(b) Land and Building was found to be undervalued by Rs.20000, stock was found overvalued by Rs.14000 and provision for doubtful debts was made equal to 5% of the debtors.
(c) Capital accounts of the old partners to be re adjusted in the new profit sharing ratio on the basis of C's capital, any excess or deficiency to be adjusted in cash.

You are required to:
(i) Pass journal entries
(ii) Prepare partner's capital accounts
(iii) Balance sheet of the new firm
Show your workings clearly

Answer 1

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