On 31st March, 2024, the balance sheet of Ram and Shyam

77 :-  On 31^st March, 2024, the balance sheet of Ram and Shyam who share profits and losses in the ratio of 3:2 was as follows

They decided to admit Mahesh on 1st April 2024, for 1/5th share which Mahesh acquired wholly from Shyam on the following terms:
(i) Mahesh shall bring Rs 25,000 as his share of premium for goodwill.
(ii) A debtor whose dues of Rs 7,500 were written off as bad debts paid Rs 5,,000 in settlement.
(iii) A claim of Rs 12,500 on account of workmen compensation was to be provided for.
(iv) Machinery was undervalued by Rs 5,000. Stock was valued 10% more than its market value.
(v) Mahesh was to bring in capital equal to 20% of the combined capitals of Ram and Shyam after all adjustments.
Prepare revaluation account, partners capital accounts and balance sheet of the new firm.

Solution :-

WORKING NOTES
(a) Calculation of correct value of stock
Let the market value of stock be x
Therefore,
82,500 = x + 10x /100
82,500 = 110x/100
82,500 x 100/110 = x
75,000 = x (market value of stock)
Thus, stock is overvalued by Rs 7,500

(b) Calculation of Mahesh’s capital
Mahesh capital = (1,59,000 + 1,31,000) x 20/100
= 2,90,000 x 20/100
= Rs 58,000