Answer :
### Step 1: Revaluation Account Adjustments
First, we adjust for the revaluation:
1. Land and Building: Undervalued by ₹ 50,000, so we add it to the assets.
2. Stock: Overvalued by ₹ 40,000, so we deduct it from the assets.
3. Claim on account of Workmen Compensation: ₹ 40,000 needs to be provided.
4. Unrecorded asset: Needs to be recorded at ₹ 30,000.
Total revaluation adjustment = ₹ 50,000 (Land and Building) - ₹ 40,000 (Stock) - ₹ 40,000 (Workmen Compensation) + ₹ 30,000 (Unrecorded Asset)
= ₹ 80,000
### Step 2: Goodwill Calculation
Goodwill of the firm is ₹ 2,00,000. [tex]\(R\)[/tex] is to bring his share of goodwill.
The new profit-sharing ratio is to be determined based on the given sacrifices:
1. [tex]\(P\)[/tex] sacrifices [tex]\(\frac{1}{4}\)[/tex] of his share.
Original ratio [tex]\(=\frac{3}{5}\)[/tex]
Sacrifice = [tex]\(\frac{3}{5} \frac{1}{4} = \frac{3}{20}\)[/tex].
2. [tex]\(Q\)[/tex] sacrifices [tex]\(\frac{1}{20}\)[/tex] of his share.
Original ratio [tex]\(=\frac{2}{5}\)[/tex]
Sacrifice = [tex]\(\frac{2}{5} \frac{1}{20} = \frac{2}{100} = \frac{1}{50}\)[/tex].
[tex]\(R\)[/tex]'s share of the profits > [tex]\( \frac{1}{5}\)[/tex] = [tex]\(3/20 + 1/50 = \frac{15}{100} + \frac{2}{100} = \frac{17}{100}\)[/tex] or [tex]\(\frac{1}{6}\)[/tex].
Goodwill to be brought by [tex]\(R\)[/tex] = [tex]\(\frac{1}{6} \times ₹ 2,00,000\)[/tex]
= ₹ 1,20,000.
Since [tex]\(R\)[/tex] brings only 60% of ₹ 1,20,000 in cash:
Cash brought for goodwill = 0.60 x ₹ 1,20,000
= ₹ 72,000.
### Step 3: Calculation of New Capitals
1. Partner [tex]\(P\)[/tex] Capital Adjustment:
Partner [tex]\(P\)[/tex] had ₹ 8,00,000 and has to adjust for goodwill and revaluation.
New capital of [tex]\(P\)[/tex] = ₹ 8,00,000 - [tex]\(\frac{3}{20} \times ₹ 1,20,000\)[/tex] = ₹ 8,00,000 - ₹ 24,000 = ₹ 7,76,000.
2. Partner [tex]\(Q\)[/tex] Capital Adjustment:
Partner [tex]\(Q\)[/tex] had ₹ 4,00,000 and has to adjust for goodwill and revaluation.
New capital of [tex]\(Q\)[/tex] = ₹ 4,00,000 - [tex]\(\frac{1}{50} \times ₹ 1,20,000\)[/tex] = ₹ 4,00,000 - ₹ 8,000 = ₹ 3,92,000.
3. Partner [tex]\(R\)[/tex] Capital Adjustment:
Partner [tex]\(R\)[/tex] brings ₹ 2,50,000 in cash plus goodwill. Thus,
New capital of [tex]\(R\)[/tex] = ₹ 2,50,000 + ₹ 72,000 = ₹ 3,22,000.
4. Net Adjusted Capital after Revaluation:
Total = [tex]\(P\)[/tex]'s capital + [tex]\(Q\)[/tex]'s Capital + [tex]\(R\)[/tex]'s Capital + Total Revaluation
= ₹ 7,76,000 + ₹ 3,92,000 + ₹ 3,22,000 + ₹ 80,000
= ₹ 15,70,000.
### Step 4: New Balance Sheet as of 1st April 2024
Liabilities Side:
| Liabilities | Amount (₹) |
|----------------------------------|-------------|
| Sundry Creditors | ₹ 1,45,000 |
| General Reserve | ₹ 1,80,000 |
| Workmen Compensation Reserve | ₹ 1,80,000 |
| Investment Fluctuation Reserve | ₹ 25,000 |
| Capital Accounts: | |
| - [tex]\(P\)[/tex] | ₹ 7,76,000 |
| - [tex]\(Q\)[/tex] | ₹ 3,92,000 |
| - [tex]\(R\)[/tex] | ₹ 3,22,000 |
| Total Liabilities | ₹ 19,20,000|
Assets Side:
| Assets | Amount (₹) |
|----------------------------------|------------|
| Land and Building | ₹ 10,00,000 |
| Stock | ₹ 1,60,000 |
| Investments | ₹ 1,20,000 |
| Debtor's Provision Reductions | ₹ 25,000 |
| Unrecorded Asset | ₹ 30,000 |
| Cash at Bank | ₹ 1,00,000 |
| Adv Suspense A/c | ₹ 10,000 |
| Total Assets | ₹ 14,35,000|
Here is your new Balance Sheet ready for the new firm including [tex]\(R\)[/tex] on 1st April, 2024.
First, we adjust for the revaluation:
1. Land and Building: Undervalued by ₹ 50,000, so we add it to the assets.
2. Stock: Overvalued by ₹ 40,000, so we deduct it from the assets.
3. Claim on account of Workmen Compensation: ₹ 40,000 needs to be provided.
4. Unrecorded asset: Needs to be recorded at ₹ 30,000.
Total revaluation adjustment = ₹ 50,000 (Land and Building) - ₹ 40,000 (Stock) - ₹ 40,000 (Workmen Compensation) + ₹ 30,000 (Unrecorded Asset)
= ₹ 80,000
### Step 2: Goodwill Calculation
Goodwill of the firm is ₹ 2,00,000. [tex]\(R\)[/tex] is to bring his share of goodwill.
The new profit-sharing ratio is to be determined based on the given sacrifices:
1. [tex]\(P\)[/tex] sacrifices [tex]\(\frac{1}{4}\)[/tex] of his share.
Original ratio [tex]\(=\frac{3}{5}\)[/tex]
Sacrifice = [tex]\(\frac{3}{5} \frac{1}{4} = \frac{3}{20}\)[/tex].
2. [tex]\(Q\)[/tex] sacrifices [tex]\(\frac{1}{20}\)[/tex] of his share.
Original ratio [tex]\(=\frac{2}{5}\)[/tex]
Sacrifice = [tex]\(\frac{2}{5} \frac{1}{20} = \frac{2}{100} = \frac{1}{50}\)[/tex].
[tex]\(R\)[/tex]'s share of the profits > [tex]\( \frac{1}{5}\)[/tex] = [tex]\(3/20 + 1/50 = \frac{15}{100} + \frac{2}{100} = \frac{17}{100}\)[/tex] or [tex]\(\frac{1}{6}\)[/tex].
Goodwill to be brought by [tex]\(R\)[/tex] = [tex]\(\frac{1}{6} \times ₹ 2,00,000\)[/tex]
= ₹ 1,20,000.
Since [tex]\(R\)[/tex] brings only 60% of ₹ 1,20,000 in cash:
Cash brought for goodwill = 0.60 x ₹ 1,20,000
= ₹ 72,000.
### Step 3: Calculation of New Capitals
1. Partner [tex]\(P\)[/tex] Capital Adjustment:
Partner [tex]\(P\)[/tex] had ₹ 8,00,000 and has to adjust for goodwill and revaluation.
New capital of [tex]\(P\)[/tex] = ₹ 8,00,000 - [tex]\(\frac{3}{20} \times ₹ 1,20,000\)[/tex] = ₹ 8,00,000 - ₹ 24,000 = ₹ 7,76,000.
2. Partner [tex]\(Q\)[/tex] Capital Adjustment:
Partner [tex]\(Q\)[/tex] had ₹ 4,00,000 and has to adjust for goodwill and revaluation.
New capital of [tex]\(Q\)[/tex] = ₹ 4,00,000 - [tex]\(\frac{1}{50} \times ₹ 1,20,000\)[/tex] = ₹ 4,00,000 - ₹ 8,000 = ₹ 3,92,000.
3. Partner [tex]\(R\)[/tex] Capital Adjustment:
Partner [tex]\(R\)[/tex] brings ₹ 2,50,000 in cash plus goodwill. Thus,
New capital of [tex]\(R\)[/tex] = ₹ 2,50,000 + ₹ 72,000 = ₹ 3,22,000.
4. Net Adjusted Capital after Revaluation:
Total = [tex]\(P\)[/tex]'s capital + [tex]\(Q\)[/tex]'s Capital + [tex]\(R\)[/tex]'s Capital + Total Revaluation
= ₹ 7,76,000 + ₹ 3,92,000 + ₹ 3,22,000 + ₹ 80,000
= ₹ 15,70,000.
### Step 4: New Balance Sheet as of 1st April 2024
Liabilities Side:
| Liabilities | Amount (₹) |
|----------------------------------|-------------|
| Sundry Creditors | ₹ 1,45,000 |
| General Reserve | ₹ 1,80,000 |
| Workmen Compensation Reserve | ₹ 1,80,000 |
| Investment Fluctuation Reserve | ₹ 25,000 |
| Capital Accounts: | |
| - [tex]\(P\)[/tex] | ₹ 7,76,000 |
| - [tex]\(Q\)[/tex] | ₹ 3,92,000 |
| - [tex]\(R\)[/tex] | ₹ 3,22,000 |
| Total Liabilities | ₹ 19,20,000|
Assets Side:
| Assets | Amount (₹) |
|----------------------------------|------------|
| Land and Building | ₹ 10,00,000 |
| Stock | ₹ 1,60,000 |
| Investments | ₹ 1,20,000 |
| Debtor's Provision Reductions | ₹ 25,000 |
| Unrecorded Asset | ₹ 30,000 |
| Cash at Bank | ₹ 1,00,000 |
| Adv Suspense A/c | ₹ 10,000 |
| Total Assets | ₹ 14,35,000|
Here is your new Balance Sheet ready for the new firm including [tex]\(R\)[/tex] on 1st April, 2024.
