A and B are partners of AB Co. sharing profits and losses in the ratio of 3 : 1 and B and C are partners of BC & Co. sharing profits and losses in the ratio of 2 : 1. On 31st March, 2015, they decided to amalgamate and form a new firm ABC & Co. wherein A, B and C would be partners sharing profits and losses in the ratio of 3 : 2 : 1.
The Balance Sheet of two firms on the above date were as under :
|
Liabilities |
AB & Co. ~ |
BC & Co. ~ |
Assets |
AB & Co. ~ |
BC & Co. ~ |
|
Capital : |
|
|
Fixed Assets : |
|
|
|
A |
96,000 |
—- |
Building |
20,000 |
—- |
|
B |
64,000 |
80,000 |
Machinery |
60,000 |
64,000 |
|
C |
—- |
40,000 |
Furniture |
8,000 |
2,400 |
|
Reserves |
20,000 |
60,000 |
Current Assets : |
|
|
|
Creditors |
48,000 |
46,400 |
Stock |
48,000 |
56,000 |
|
Due to AB & Co. |
—- |
40,000 |
Debtors |
64,000 |
80,000 |
|
Bank Loan |
32,000 |
—- |
Cash |
20,000 |
40,000 |
|
|
|
|
Due from BC & Co. |
40,000 |
—- |
|
|
|
|
Advances |
—- |
24,000 |
|
|
2,60,000 |
2,66,400 |
|
2,60,000 |
2,66,400 |
The amalgamated new firm ABC & Co. took over the business on the following terms :
(a) Building of AB & Co. was valued at ~ 40,000.
(b) Machinery of AB & Co. was valued at ~ 90,000 and that of BC & Co. at ~ 80,000.
(c) Goodwill of AB & Co. was valued at ~ 20,000 and that of BC & Co. at ~ 16,400 but no goodwill account was to appear in the books of ABC & Co.
(d) Partners of the new firm will bring necessary cash to pay other partners to adjust their capital according to the profit sharing ratio.
Show journal entries in the books of ABC & Co. and prepare the Balance Sheet as on 31st March, 2015.
