Q102 A and B are partners sharing profits in the ratio of 3 2 They admit C as a new partner from 1st...........

Q102.A and B are partners sharing profits in the ratio of 3 : 2. They admit C as a new partner from 1st April, 2019. They have decided to share future profits in the ratio of 4 : 3 : 3. The Balance Sheet as at 31st March, 2019 is given below:

Liabilities			Assets
A's Capital B's Capital Workmen Compensation Reserve Investments Fluctuation Reserve Employee's Provident Fund	1,76,000 2,54,000	4,30,000 20,000 10,000 34,000	Goodwill Land and Building Investment (Market value 45,000) Debtors Less: Provision for Doubtful Debts	1,00,000 10,000	34,000 60,000 50,000 90,000

C's Loan		3,00,000	Stock Bank Balance Advertising Suspense A/c		3,00,000 2,50,000 10,000
		7,94,000			7,94,000

Terms of C's admission are as follows:

C contributes proportionate capital and 60% of his share of goodwill in cash.
Goodwill is to be valued at 2 years' purchase of super profit of last three completed years. Profits for the years ended 31st March were: 2017 − 4,80,000; 2018 − 9,30,000; 2019 − 13,80,000.

The normal profit is 5,30,000 with same amount of capital invested in similar industry. (iii) Land and Building was found undervalued by 1,00,000.

Stock was found overvalued by 31,000.
Provision for Doubtful Debts is to be made equal to 5% of the debtors. (vi) Claim on account of Workmen Compensation is 11,000.

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