Page 156 - DEBKVOL-1

Chapter 6 Retirement of a Partner 6.23
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(c) A Provision of 5% be made for Doubtful Debts.
(d) Trademarks are valueless.
(e) An item of ` 1,200 included in Creditors is not likely to be claimed.
(f) Goodwill be valued at one year’s purchase of the average profit of the past three years, viz.,
2015–2016: ` 12,000; 2016–2017: ` 10,000 and 2017–2018: ` 9,500.
Pass Journal entries, give Capital Accounts and the Balance Sheet of the remaining partners.
[Ans.: Gain (Profit) on Revaluation—` 15,300; Z’s Loan A/c—` 29,500;
Capitals: X—` 34,250; Y—` 24,250; Balance Sheet Total—` 99,700.]
6. The Balance Sheet of M, N and O who are sharing profits and losses in the ratio of 1/2, 1/3 and 1/6 respectively
as at 31st March, 2018 was:
Liabilities ` Assets `
Bills Payable 6,400 Cash in Hand 150
Sundry Creditors 12,500 Cash at Bank 25,500
Profit and Loss A/c 4,500 Bills Receivable 5,400
Capital A/cs: Book Debts 17,800
M 40,000 Stock 22,300
N 25,000 Furniture 3,500
O 20,000 85,000 Plant and Machinery 9,750
Building 24,000
1,08,400 1,08,400

M retires from business on 1st April, 2018 and his share in the firm is to be ascertained on revaluation of
assets as follows:
Stock ` 20,000; Furniture ` 3,000; Plant and Machinery ` 9,000; Building ` 20,000 and ` 850 is to be provided
for Doubtful Debts.
The goodwill of the firm is agreed to be valued at ` 6,000 and adjustment in this respect was to be made
in the continuing Partners’ Capital Accounts without raising Goodwill Account.
M is to be paid ` 11,050 in cash on retirement and balance in three equal yearly instalments with interest
@ 5% p.a.
Pass Journal entries and give the Loan Account of M till it is finally closed. (Foreign 1994, AI 2002 C, Modified)
[Ans.: Loss on Revaluation—` 8,400; M’s Loan A/c—` 30,000.]
7. The Balance Sheet of A, B and C who were sharing the results in proportion to their capitals as at
31st March, 2018 is:
Liabilities ` Assets `
Bills Payable 1,000 Bank Balance 2,750
Sundry Creditors 2,450 Debtors 2,500
Capital A/cs: Less: Provision for Doubtful Debts 50 2,450
A 10,000 Stock 4,000
B 7,500 Plant and Machinery 4,250
C 5,000 22,500 Factory Building 12,500
25,950 25,950
B retired on the following day and the adjustments made as follows:
(a) Stock was reduced by 6%.
(b) Factory Building was appreciated by 20%.