question_answer

Kanu, Sunny and Richa were partners sharing profits in the ratio of 3 : 2 : 1. On 31st March, 2017 their balance sheet stood as under: Balance Sheet as at 31st March, 2017

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Creditors		72,000	Cash at Bank	70,000
General Reserve		24,000	Investments	50,000
Capital A/cs			Patents	15,000
Kanu	75,000		Stock	25,000
Sunny	70,000		Debtors	20,000
Richa	50,000	1,95,000	Building	75,000
			Machinery	36,000
		2,91,000		2,91,000

Richa died on 31st May, 2017. The following terms were agreed upon: (i) Goodwill will be valued at 3 years' purchase of the average profits of last 5 years, which were  2012 ? Rs. 40,000; 2013 ? Rs. 40,000; 2014 ? Rs. 30,000; 2015 ? Rs. 40,000 and 2016 ? Rs. 50,000. (ii) For the purpose of calculating Richa's share of profits till the date of death, it was agreed that the same be calculated based on the average profits for the last 2 years. Prepare Richa's capital account to be rendered to the executor.

Answer:

Average profit it for last two years = Rs. 45,000