Question

Following is the Balance Sheet of X, Y and Z as at 31st March, 2018. They shared profits in the ratio of 3 : 3 : 2.
On 1st April, 2018, Y decided to retire from the firm on the following terms:
(a) Stock to be depreciated by ₹ 12,000.
(b) Advertisements Suspense Account to be written off.
(c) Provision for Doubtful Debts to be increased to ₹ 6,000.
(d) Fixed Assets be appreciated by 10%.
(e) Goodwill of the firm, valued at ₹ 80,000 and the amount due to the retiring partners to be adjusted in X’s and Z’s Capital Accounts.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet to give effect to the above.

Answer 1

Y's share of goodwill is to be distributed between X and Z in their =3 : 2(Gaining Ratio)

Step by Step Explanation:

Adjustment of goodwill

X : Y : Z = 3 : 3 : 2( Old ratio)

Y retires from the firm.

Gaining Ratio = 3  : 2

Ys Goodwill = 80,000×$\frac{3}{8}$ = 30,000 rs.

Y's share of goodwill is to be distributed between X and Z in their =3 : 2(Gaining Ratio)

X's  =30,000 ×$\frac{3}{5}$ = 18,000 rs.

Z's  = 30,000 × = 12,000 rs.

Y's share of goodwill is to be distributed between X and Z in their =3 : 2(Gaining Ratio)

2) Distribution of General reserve (Old ratio)

X's  =80,000 ×$\frac{3}{8}$ = 30,000 rs.

Y's  =80,000 ×$\frac{3}{8}$ = 30,000 rs.

Z's  = 80,000 ×$\frac{2}{8}$ = 20,000 rs.

3) Writing off Advisement Suspense(Old ratio)

X's  =16,000 ×$\frac{3}{8}$ = 6,000 rs.

Y's  =16,000 ×$\frac{3}{8}$ = 6,000 rs.

Z's  =16,000 ×$\frac{2}{8}$ = 4,000 rs.

4) Writing off profit and loss (loss) in Old ratio

X's  =4,000 ×$\frac{3}{8}$ = 1,500 rs.

Y's  =4,000 ×$\frac{3}{8}$ = 1,500 rs.

Z's  =1,000 ×$\frac{2}{8}$ = 1,000 rs.