48 :- N, S and B were partners in a firm sharing profits and losses in proportion of 1/2, 1/6 and 1/3 respectively. The balance sheet of the firm as at 31st March 2017 was as follows :-
B retired from the business on the above date and the partners agreed to the following
(i) Freehold premises and stock were to be appreciated by 20% and 15% respectively.
(ii) Machinery and Furniture were to be depreciated by 10% and 7% respectively.
(iii) Provision for Bad debts was to be increased by Rs 1,500.
(iv) On B’s retirement goodwill of the firm was valued at Rs 21,000.
(v) The continuing partners decided to adjust their capitals in their new profit sharing ratio after retirement of B. Surplus/deficit , if any, in their capital accounts was to be adjusted through their current accounts.
Prepare Revaluation account, Partners Capital accounts and the balance sheet of the reconstituted firm.
Solution :-
WORKING NOTES :-
(i) Calculation for gaining ratio
New ratio – old ratio
N = 3/4 – 3/6 = 6/24
S = 1/4 – 1/6 = 2/24
Gaining ratio = 3:1
(ii) Calculation of N’s capital and S’s capital in new firm
Adjusted capital of N and S = 33,730 + 31,243 = Rs 64,973
New capital of N = 64,973 x 3/4 = Rs 48,730
New capital of S = 64,973 x 1/4 = Rs 16,243
(iii) Adjustment of goodwill
B’s share of goodwill = 21,000 x 2/6 = Rs 7,000
N’s share of goodwill = 7,000 x 3/4 = Rs 5,250
S’s share of goodwill = 7,000 x 1/4 = Rs 1,750