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Model Test Papers M.413

16. X and Y were partners in a firm sharing profits in the ratio of 2 : 1. Their Balance
Sheet as at 31st March, 2018 was as follows:
BALANCE SHEET OF X AND Y as at 31st March, 2018
Liabilities ` Assets `
Sundry Creditors 5,90,000 Cash at Bank 3,32,500
Z’s Loan 1,50,000 Debtors 1,50,000
Capital A/cs: Less: Provision for Doubtful Debts 2,500 1,47,500
X 2,70,000 Stock 3,20,000
Y 1,80,000 4,50,000 Land and Building 3,00,000
Profit and Loss Account 90,000
11,90,000 11,90,000

Z was admitted to the partnership with effect from 1st April, 2018 on the following terms:
(a) Z will get 1/4th share in the profits of the firm.
(b) Z’s loan will be converted into his capital.
(c) The goodwill of the firm was valued at ` 2,40,000 and Z brought his share of
goodwill premium by cheque, half of which was withdrawn by X and Y.
(d) There is likely to be a claim against the firm for damages, a provision of ` 15,000
was to be made for the same.
(e) A bill for ` 13,000 for electric charges has been omitted, now it is to be provided for.
(f ) Provision for Doubtful Debts is to be made equal to 5% of the debtors.
(g) Included in Sundry Creditors was an item of ` 12,000 which was not to be paid
and, therefore, had to be written back.
After making the above adjustments, the Capital Accounts of X and Y were to be adjusted
on the basis of Z’s capital. Shortfall was to be brought in and excess was to be paid.
Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet
of the new firm.
Or
Following is the Balance Sheet of Aruna, Karuna and Varuna as at 31st March, 2018,
who have agreed to share profits and losses in proportion of their capitals:
BALANCE SHEET OF ARUNA, KARUNA AND VARUNA as at 31st March, 2018

Liabilities ` Assets `
Capital A/cs: Land and Building 2,00,000
Aruna 2,00,000 Machinery 3,00,000
Karuna 3,00,000 Stock 1,00,000
Varuna 2,00,000 7,00,000 Sundry Debtors 1,10,000
General Reserve 35,000 Less: Provision for Doubtful Debts 10,000 1,00,000
Workmen Compensation Reserve 15,000 Cash at Bank 1,00,000
Sundry Creditors 50,000
8,00,000 8,00,000

On 31st March, 2018, Aruna desired to retire from the firm and the remaining partners
decided to carry on the business. It was agreed to revaluate the assets and reassess
the liabilities on the following basis: