On 31st March, 2018 , The Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:
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B retires and following readjustments of assets and liabilities have been agreed upon before ascertainment of the amount payable to B:
(a) Out of the amount of insurance premium which was debited to Profit and Loss Account, Rs. 1,000 be carried forward for Unexpired insurance.
(b) Freehold Premises be appreciated by 10%.
(c) Provision for Doubtful Debts is brought up to 5% on Debtors.
(d) Machinery be depreciated by 5%.
(e) Liability for Workmen Compensation to the extent of Rs.1,500 would be created.
(f) That the goodwill of the entire firm be fixed at Rs. 18,000 and B’s share of the same be adjusted into the accounts of A and C who are going to share future profits in the proportion of 3/4th and 1/4th respectively.
(g) Total capital of the firm as newly constituted be fixed at Rs. 60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.
(h) B be paid Rs. 5,000 in cash and the balance be transferred to his Loan Account. Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.