X, Y and Z are partners sharing profits in the ratio of 5 : 3 : 2. Y retires on 1st April, 2019 from the firm, on which date capitals of X, Y and Z after all adjustments are Rs. 1,03,680, Rs. 87,840 and Rs. 26,880 respectively. The Cash and Bank Balance on that date was Rs. 9,600. Y is to be paid through amount brought in by X and Z in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be X 3/5 and Z 2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank balance of Rs. 7,200 was to be maintained and pass the necessary Journal entries.

SOLUTION

Total capital of firm before retirement = 1,03,680+87,840+26,880 = Rs. 2,18,400
Availability of cash = 9,600-7,200 (Minimum Balance) = Rs. 2,400
Combined new capital of X and Z = Rs. 2,16,000


X’s new capital = 2,16,000 × 3/5 = Rs. 1,29,600
Existing capital of X = Rs. 1,03,680
So, X has to bring = 1,29,600−1,03,680 = Rs. 25,920


Z’s new capital = 2,16,000 × 2/5 = Rs. 86,400
Existing capital of Z = Rs. 26,880
So, Z has to bring = 86,400−26,880 = Rs. 59,520  


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