On 31.12.2017, the Balance Sheet of M/s. A, B and C, sharing profits and losses in proportion to their capitals, stood as follows:

On that date, B wants to retire from the firm and the remaining partners decide to carry on the firm. The following readjustment of assets and liabilities have been agreed upon before the ascertainment of the amount payable to B :

(i) That out of the amount of insurance premium which was debited annually entirely to Profit and Loss Account, ₹10,000 be carried forward for unexpired insurance on 31.12.2017;

(ii) That the land and building be appreciated by 10%.

(iii) That the provision for doubtful debts be brought up to 5% on debtors;

(iv) That machinery be depreciated by 5%;

(v) That a provision for ₹15,000 be made in respect of an outstanding bill for repairs;

(vi) That the goodwill of the entire firm be fixed at ₹1,80,000 and B’s share of the same adjusted in the accounts of A and C who share future profits in the proportion of 3/4th and 1/4th respectively (no goodwill account being raised); and,
(vii) that B be paid ₹50,000 in cash and the balance be transferred to his Loan Account. 

Prepare Revaluation Account, the Capital Accounts of the Partners and the Balance Sheet of the firm of A and C.

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Creditors Capital A/cs: A B C Liabilities ₹ 1,08,000 Cash at Bank Debtors 4,50,000 Less: Provision for Doubtful Debts 3,00,000 Stock 1,50,000 Machinery 10,08,000 Land and Building Assets 1,00,000 2,000 ₹ 80,000 98,000 90,000 2,40,000 5,00,000 10,08,000