X and Y sharing profits in the ratio of 3 : 2 had the following Balance Sheet as at 31st March, 2018
Under liabilities items are:
1 creditor 15000
2 General reserved=12000
3 Capital
X =54000
Y =36000
4 Current
X =10000
Y =2000
and total liabilities are 129000
Under Assets items are :
1 Cash =5000
2 Debtors=20000
3 Provision for doubtful debts =800
4 Patents=14800
5 Investment =8000
6 Machinery =72000
7 Goodwill =10000
and the total of the Assets items =129000
On 1st April, 2018, they decided to admit Z on the following terms: (i) A Provision of 5% is to be created on Debtors.
(ii) Accrued Income of 1,500 does not appear in the books and 5,000 are outstanding for salaries.
(iii) The present market value of Investments is 6,000. X takes over the investments at this value.
(iv) The new profit-sharing ratio of partners will be 4:3: 2.
(v) Z will bring in 20,000 as his capital.
(vi) Z is to pay in cash an amount equal to his share in the firm's goodwill valued at twice the average profit of the last three years which were 25,000; 26,000 and 30,000
respectively.
(vii) Half the amount of goodwill is withdrawn by the old partners. Prepare Revaluation Account Partners' Capital Accounts, Current Accounts and opening Balance Sheet of the new firm.
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