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M.360                                                An Aid to Accountancy—CBSE XII

                      16.  X, Y and Z were in partnership sharing profits in proportion to their capitals. Their
                          Balance Sheet as on 31st March, 2018 was as follows:

                     Liabilities                          `     Assets                              `
                     Sundry Creditors                   15,600  Cash                               16,000
                     Employees’ Provident Fund          10,000   Debtors                  20,000
                     Reserve                             6,000   Less:  Provision for Doubtful Debts   400   19,600
                     Capital A/cs:                              Stock                              28,000
                     X                           90,000         Machinery                          48,000
                     Y                           60,000         Building                          1,00,000
                     Z                           30,000  1,80,000
                                                       2,11,600                                   2,11,600
                          On the above date,  Y  retired owing to ill health. They agreed to the following
                          adjustments in the books of account to decide the amount payable to Y:
                            (i)  Building to be appreciated by 10%.
                           (ii)  Provision for Doubtful Debts to be increased to 5% of Debtors.
                          (iii)  Machinery to be brought down by 15%.
                           (iv)  Goodwill of the firm be valued at ` 36,000 and be adjusted into the Capital
                               Accounts of X and Z, who will share profits in future in the ratio of 3 : 1.
                           (v)  Provision be made for outstanding repairs bill for ` 3,000.
                           (vi)  Included in the value of Sundry Creditors is ` 1,800 for an outstanding legal
                               claim, which will not arise.
                          (vii)  Out of the insurance premium paid ` 2,000 is to be treated as prepaid insurance.
                               The amount was earlier debited to Profit and Loss Account.
                         (viii)  X and Z also decide that the total capital of the new firm will be ` 1,20,000 in
                               their profit-sharing ratio.

                           (ix)  Y to be paid ` 9,000 immediately and balance to be transferred to his Loan
                               Account.
                          Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of
                          the new firm after Y’s retirement.
                                                             Or
                          Annu and Mannu are partners in a firm sharing profits in the ratio of 3 : 2. Their
                          Balance Sheet as on 31st March, 2018 is as follows:

                     Liabilities                          `     Assets                              `
                     Creditors                          56,000   Cash at Bank                      77,000
                     General Reserve                    10,000   Debtors                  42,000
                     Investment Fluctuation Reserve      4,000   Less:  Provision for Doubtful Debts   7,000   35,000
                     Capital A/cs:                              Investments (Market Price ` 19,000)      21,000
                     Annu                      1,19,000         Building                           98,000
                     Mannu                     1,12,000   2,31,000   Machinery                     70,000
                                                       3,01,000                                   3,01,000
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