A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2019 stood as follows:

Capital A/c : Land and Building3,50,000
 A – 2,50,000 Machinery2,40,000
 B – 2,50,000 Computers70,000
 C – 2,00,0007,00,000Investments (Market value Rs. 90,000)1,00,000
General Reserve 60,000Sundry Debtors50,000
Investments Fluctuation Reserve 30,000Cash in Hand10,000
Sundry Creditors 90,000Cash at Bank55,000
   Advertisement Suspense5,000
  8,80,000 8,80,000

They decided to share profits equally w.e.f. 1st April, 2019. They also agreed that:
(i) Value of Land and Building be decreased by 5%.
(ii) Value of Machinery be increased by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at Rs. 20,000 was unrecorded and is now to be recorded in the books.
(v) Out of Sundry Creditors, Rs. 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years’ purchase of last 3 years profits. Profits being for 2018-19 − Rs. 50,000 (Loss); 2017-18 − Rs. 2,50,000 and 2016-17 − Rs. 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at a remuneration (including expenses) of Rs. 5,000. Expenses came to Rs. 3,000.
Pass Journal entries and prepare Revaluation Account.


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