37 :- X, Y and Z are partners sharing profits and losses in the ratio of 3:2:1. Balance sheet of the firm as at 31st March 2025 was as follows :-
Z retired on 1st April 2025, on the following terms
(a) Goodwill of the firm is to be valued at Rs 34,800
(b) Value of patents is to be reduced by 20% and that of machinery to 90%
(c) Provision for doubtful debts is to be @6% on debtors
(d) Z took the investment at market value
(e) Liability for workmen compensation to the extent of Rs 750 is to be created.
(f) A liability of Rs 4,000 included in creditors is not to be paid.
(g) Amount due to Z to be paid as follows;
Rs 5,067 immediately, 50% of the balance within one year and the balance by a draft for 3 months
Give necessary journal entries for the treatment of goodwill, prepare revaluation account, Capital accounts and the balance sheet of the new firm.
Solution :-
WORKING NOTES
Old profit sharing ratio = 3:2:1
Z retired
New profit sharing ratio = 3:2
Gaining ratio = 3:2
Calculation of goodwill
Z’s share in goodwill = 34,800 x 1/6 = Rs 5,800
X will contribute = 5,800 x 3/5 = Rs 3,480
Y will contribute = 5,800 x 2/5 = Rs 2,320