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Model Test Papers M.233

16. A, B and C are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On
31st March, 2018, the Balance Sheet of the firm stood as follows:

Liabilities ` Assets `
Capital A/cs: Fixed Assets 2,50,000
A 2,00,000 Stock 1,10,000
B 1,00,000 Book Debts 90,000
C 80,000 3,80,000 Cash at Bank 20,000
General Reserve 30,000
Sundry Creditors 53,000
Outstanding Expenses 7,000
4,70,000 4,70,000
On the above date B decides to retire from the firm, for this purpose:
(a) Goodwill is to be valued at ` 1,90,000.
(b) Fixed Assets be valued at ` 3,00,000.

(c) Stock be considered worth ` 10,000.
(d) A liability of ` 1,900 for outstanding rent has not been shown in the books of the
firm. The same is to be recorded now.

(e) Insurance premium amounting to ` 5,700 was debited to Profit and Loss Account,
of which ` 1,900 is related to next year.
B is to be paid in cash brought in by A and C in such a way so as to make their capital
proportionate to their new profit-sharing ratio which is to be 3 : 2 respectively.
Prepare Ledger Accounts and the resultant Balance Sheet.
Or
A and B are partners in a firm sharing profits in the ratio 2 : 1. C is admitted into the
partnership on 1st April, 2018 for 1/4th share in profits. He will bring in ` 30,000 as
capital and capitals of A and B are to be adjusted in the new profit-sharing ratio. The
Balance Sheet of A and B as at 31st March, 2018 (before C’s admission) was as under:

Liabilities ` Assets `
Creditors 8,000 Cash in Hand 2,000
Bills Payable 4,000 Cash at Bank 10,000
General Reserve 6,000 Sundry Debtors 8,000
Capital A/cs: Stock 10,000
A 50,000 Furniture 5,000
B 32,000 82,000 Machinery 25,000
Building 40,000
1,00,000 1,00,000

Other terms of agreement are as under:
(a) C will bring in ` 12,000 as his share of goodwill.
(b) Building be valued at ` 45,000 and Machinery at ` 23,000.
(c) A Provision for Doubtful Debts is to be created @ 6% on Sundry Debtors.