[ISC] Q. 16 Solution of Retirement of Partner TS Grewal ISC 2023-24 Edition

Ram, Laxman and Bharat were partners sharing profits in the ratio of 2 : 2 : 1. Laxman retired on 1st April, 2023. On the date of his retirement some of the assets and liabilities in the books were:

Creditors ₹ 70,000; Building ₹ 1,00,000; Plant and Machinery ₹ 40,000; Stock of raw materials ₹ 20,000; Stock of finished goods ₹ 30,000 and Debtors ₹ 20,000.

Following was agreed among the partners on Laxman’s retirement:

1. (i) Building to be appreciated by 20%.
2. (ii) Plant and Machinery to be reduced (depreciated) by 10%.
3. (iii) Provision of 5% on Debtors to be created for Doubtful Debts.
4. (iv) Stock of raw materials to be valued at ₹ 18,000 and finished goods at ₹ 35,000.
5. (v) An old computer previously written off was sold for ₹ 2,000.
6. (vi) An employee who met with accident was paid ₹ 5,000 as compensation.

Pass necessary Journal entries to record the above adjustments and prepare Revaluation Account.