The balance sheet of A Barnes and C Darwin at 31 March, 20X8 is as follows:

The partners share profits and losses: Barnes three-fifths and Darwin two-fifths. At the date of the above balance sheet, it was agreed to admit E Fox who was to bring cash of £25,000 into the firm as capital. The new profit and loss ratio would be Barnes, one half; Darwin, one-third; and Fox, one-sixth.

Barnes and Darwin agreed the following revaluation amounts prior to the admission of Fox. Any goodwill arising is to remain in the ledger.

Required:

(a) Prepare the journal entries to record the above.

(b) Prepare the balance sheet of the new firm.

(c) Show by journal entry how the necessary adjustment would be made if the partners agreed that goodwill should not remain in the ledger.

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Fixed assets Building Fittings Current assets Stock Debtors Less: Current liabilities Bank Creditors Represented by: Capital accounts Barnes Darwin £ 3,000 8,000 £ 16,000 5,000 21,000 (11,000) F 51,000 29,000 80,000 10,000 90,000 60,000 30,000 90,000