1.

Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2018: They agree to admit C into the partnership on the following terms: (a) C was to bring in ₹ 7,500 as his capital and ₹ 3,000 as goodwill for 1/4th share in the firm. (b) Values of the Stock and Plant and Machinery were to be reduced by 5%. (c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtor ₹ 375. (d) Building Account was to be appreciated by 10%. Pass necessary journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment Account (or Revaluation Account), Capital Accounts and Balance Sheet of the new firm.

Answer»

essary JOURNAL entries are GIVEN below:Explanation:Sacrificing Ratio A and B =2: 1Distribution of PREMIUM for Goodwill ( in sacrificing ratio) A's Goodwill B's Goodwill Distribution of Profit from Profit and Loss Adjustment Account (in old ratio) Thus, A and B's profit from Profit and Loss Adjustment Account will be Rs. 500 and Rs. 250 respectively.



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