Question

A,B and C were partners in a firm sharing profits in the ratio of $5:3:2$. On $31-3-2015$ their Balance Sheet was as follows:
On the above date B retired and A and C agreed to continue the business on the following terms :
(1) Goodwill of the firm was valued at Rs.$1,53,000$.
(2) Provision for bad debts was to be reduced by $Rs.3,000$. (3) There was a claim of Rs.$12,000$ for workmen compensation.
(4) B will be paid $Rs.24,600$ in cash and the balance will be transferred to his loan account which will be paid in four equal yearly installments together with interest $@10\%$ p.a.
(5) The new profit sharing ratio between A and C will be $3:2$ and their capital will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts.
Prepare Revaluation Account Partners' Capital Accounts and the Balance Sheet of A and C.

Answer 1

Working Notes:
WN1: Calculation of Gaining Ratio
A's $=\frac{3}{5}-\frac{5}{10}=\frac{1}{10}$
C's $=\frac{2}{5}-\frac{2}{10}=\frac{2}{10}$
Gaining Ratio: $1:2$
WN2: Adjustment of Goodwill
B's Share of goodwill $=1,53,000\frac{3}{10}=Rs45,900$
Rs.$45,900$ will be debited to gaining partners (A and C ) in the ratio of $1:2$.

A's share $=45,900\times \frac{1}{3}Rs.15,300$
C's share $45,900\times \frac{2}{3}=Rs.30,600$
WN3 Adjustment of Capital

Adjusted Capital of A $=1,50,000+15,000+60,000-4,500-15,300=Rs.2,05,200$
Adjusted Capital of C $=60,000+6,000+24,000-1,800-30,600=Rs.57,600$
Total Adjusted Capital $=2,05,200+57.600=Rs.2,62,800$
A's New Capital $=2,62,800\times \frac{3}{5}=Rs.1,57,680$
C's New Capital $=2,62,800\times \frac{2}{5}=Rs.1,05,120$
C's New Capital > C's Adjusted Capital (C owes $Rs.47,520$ to the firm)
A's New Capital < A's Adjusted Capital (Firm Owes $Rs.47,520$ to A)
WN4 Amount transferred to B's Loan A/C
Amount to be transferred $=$ {credit side - Debit side} - Cash paid
$=(2,10,900-2,700)-24,600=Rs.1,83,600$.