|Capital A/c:||Land and Building||2,40,000|
|Karim – 2,50,000||Machinery||70,000|
|Rehman – 2,50,000||Computers Investments (Market value Rs. 90,000)||1,00,000|
|Navel – 2,00,000||7,00,000||Sundry Debtors||50,000|
|General Reserve||60,000||Cash in Hand||10,000|
|Investments Fluctuation Reserve||30,000||Cash at Bank||55,000|
|Sundry Creditors||90,000||Advertisement Suspense||5,000|
They decided to share profits equally w.e.f. 1st April, 2022. 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 2022 – Rs. 50,000 (Loss); 2021 – Rs. 2,50,000 and 2020 − Rs. 2,50,000.
(vii) Navel 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.