A and B share profits in the proportions of 3 4 and 1 4 Their Balance Sheet on Dec 31 2016 was as fo...........

A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on Dec. 31, 2016 was as follows: (3 marks)

Balance Sheet of A and B as on December 31, 2016
Liabilites		Amount (Rs)	Assets	Amount (Rs)
Sundry creditors		41,500	Cash at Bank	26,500
Reserve fund		4,000	Bills Receivable	3,000
Capital Accounts			Debtors	16,000
	A	30,000	Stock	20,000
	B	16,000	Fixtures	1,000
			Land & Building	25,000
		91,500		91,500

On Jan. 1,2017, C was admitted into partnership on the following terms:

(a) That C pays Rs 10,000 as his capital.

(b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.

(c) That stock and fixtures be reduced by 10% and a 5%, provision for doubtful debts be created on Sundry Debtors and Bills Receivable.

(d) That the value of land and buildings be appreciated by 20%.

(e) There being a claim against the firm for damages, a liability to the extent of Rs 1,000 should be created.

(f) An item of Rs 650 included in sundry creditors is not likely to be claimed and hence should be written back.

Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C.

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