Question

X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. The Balance Sheet of the firm as at 31st March, 2018 stood as follows:
Z retired on the above date on the following terms:
(a) Goodwill of the firm is to be valued at ₹ 34,800.
(b) Value of Patents is to be reduced by 20% and that of machinery to 90%.
(c) Provision for Doubtful Debts is to be created @ 6% on debtors.
(d) Z took over the investment at market value.
(e) Liability for Workmen Compensation to the extent of ₹ 750 is to be created.
(f) A liability of ₹ 4,000 included in creditors is not to be paid.
(g) Amount due to Z to be settled on the following basis:
₹ 5,067 to be paid immediately, 50% of the balance within one year and the balance by a Bill of Exchange (without interest) at 3 Months.
Give necessary journal entries for the treatment of goodwill, prepare Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.

Answer 1

Explanation:

Amount due to Z's =(21,000+3,480+2,320+1,875+1,000)-(1000+133+875+17,600) =10,067

Amount paid on Retirement immediately: Rs 5,067

Amount paid with 1 year :(5000× 50%) = Rs.2500.

Amount pays by bill of exchange (50% of Balance) = Rs.2,500