Question

Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st March, 2016, their Balance Sheet was as under:

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon: 

(a) Goodwill of the firm was valued at 2 years purchase of average profits of three completed years preceding the date of retirement. The profits for the year: 2013-14 were Rs. 1,00,000 and for 2014-15 were Rs. 1,30,000. 

(b) Fixed Assets were to be increased to Rs. 3,00,000. 

(c) Stock was to be valued at 120%. 

(d) The amount payable to Kanika was transferred to her Loan Account. Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.

Answer 1

Note: Since no information is given about the share of gain, it is assumed that old partners are gaining in their old profit sharing ratio.