A and B are in partnership sharing profits and losses in the proportion of 2/3rd and 1/3rd respectively. Their Balance Sheet as at 31st March, 2018 was: Cash Rs. 1,000; Sundry Debtors Rs. 15,000; Stock Rs. 22,000; Plant and Machinery Rs. 4,000; Sundry Creditors Rs. 2,000; Bank Overdraft Rs. 15,000; A’ Capital Rs. 15,000; B’ Capital Rs. 10,000. On 1st April, 2018 they admitted into partnership on the following terms:
(a) C to purchase one-quarter of the goodwill for Rs. 3,000 and provide Rs. 10,000 as capital. C brings in necessary cash for goodwill and capital.
(b) Profits and Losses are to be shared in the proportion of one half to A, one-quarter to B and one quarter to C.
(c) Plant and Machinery is to be reduced by 10% and Rs. 500 are to be provided for estimated Bad Debts. Stock is to be taken at a valuation of Rs. 24,940.
(d) By bringing in or withdrawing cash the capitals of A and B are to be made proportionate to that of C on their profit-sharing basis. Prepare necessary Ledger Accounts in the books of the firm relating to the above arrangement and submit the opening Balance Sheet of the new firm.
