M and n were partner in a firm. Their profit sharing ratio was 3:2. As at 31st march ,2011, their balance sheet stood as under:
liabilities
Rs.
assets
Rs.
M and n were partner in a firm. Their profit sharing ratio was 3:2. As at 31st march ,2011, their balance sheet stood as under:
liabilities
Rs.
assets
Rs.
Capital a/cs
M 500000
N 400000
Genera reserve
Bank overdraft
Sundry creditor
900000
60000
25000
75000
Land and building
Plant and machinery
Furniture and fixture
Vehicles
Goodwill
Stock
debtor
600000
200000
90000
75000
15000
30000
50000
1060000
1060000
N died on 15th may, 2011. It was agreed that
(A) Land and building to be appreciated to 120%.
(b) Value of plant and machinery, furniture and fixture and vehicles to be lowered by 10%.
(c) Goodwill to be valued at 3 years purchase of last six years average profits which were:
2005-06 Rs. 20000 2006-07 Rs.18000 2007-08 Rs.10000
2008-09 Rs.7000 2009-10 Rs.15000 2010-11 Rs.20000
(d)Rs. 3000 of debtor proved bad and hence have to be written off and provision for Rs. 2000 to be created on the debtors.
(e) The profit for the year 2011-12 accrued on the same scale as in 2010-11.
(f)a sum of Rs. 68400 to be paid immediately to the executors of N and balance to be paid in 2 equal half-yearly instalments together with interest @7% per annum.
Pass the necessary journal entry to record the above transaction and prepare Ns executors account for the year 2011-12. With working note.