Page 111 - MA-12

Retirement and Death of a Partner 4.41
6. The Balance Sheet A, B and C who were sharing profits in the ratio of 3 : 1 : 2 respectively stood as
follows on 31st March, 2017:
Liabilities ` Assets `
Bills Payable 1,20,000 Cash 70,000
Sundry Creditors 1,80,000 Stock 2,20,000
General Reserve 1,80,000 Sundry Debtors 2,00,000
Capital A/cs: Less: Provision for Doubtful Debts 10,000 1,90,000
A 3,00,000 Building 4,00,000
B 3,00,000 Machinery 3,00,000
C 2,80,000 8,80,000 Furniture 1,20,000
Advertisement Suspense A/c 60,000
13,60,000 13,60,000

On 1st April, 2017, C retires from the firm and the partners agree to the following terms:
(i) Building and Stock are to be appreciated by 20% and 15% respectively.
(ii) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(iii) Provision for Doubtful Debts to be increased to ` 15,000.
(iv) A computer previously written off is sold for ` 5,000 plus CGST and SGST @ 9% each.
(v) A provision of ` 5,000 be made in respect of outstanding legal charges.
(vi) Goodwill of the firm is valued at ` 2,10,000.
(vii) The continuing partners have decided to adjust their capitals in their New Profit-sharing Ratio
after retirement of C. Surplus/deficit, if any, in their Capital Accounts will be adjusted through
Current Accounts.
Prepare necessary Ledger Accounts and the Balance Sheet of the reconstituted firm.
7. X, Y and Z are in partnership sharing profits equally. X dies on 30th June, 2017 and the Partnership
Deed provided inter alia that:
(i) The share of deceased partner’s Capital Account shall be taken at the balance of the Capital
Accounts as on the date of the last financial year, less the withdrawals, if any, made to the date
of death.
(ii) His share of profit to the date of death be calculated on the basis of the average profits of the
three preceding years.
(iii) Goodwill of the firm shall be taken at one year’s purchase of the average profits of the preceding
five years.
(iv) The firm’s Freehold property shall be taken at an independent valuation.
The firm’s Balance Sheet as at 31st March, 2017 was as under:
Liabilities ` Assets `

Capital A/cs: Goodwill 56,700
X 90,000 Freehold Property 1,20,000
Y 60,000 Stock 45,000
Z 60,000 2,10,000 Debtors 30,000
Creditors 56,700 Bank 13,500
Cash 1,500
2,66,700 2,66,700

Freehold property was valued at ` 1,74,000.
The profits for five years ended 31st March were:
2012–13—` 34,500; 2013–14—` 42,000; 2014–15—` 27,000; 2015–16—` 24,000 and 2016–17—` 30,000.
Prepare X’s Capital Account.