Comprehension Passage
Radha, Sheela, and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2019, Sheela retires from the firm. On that date, their Balance Sheet was as follows:
Balance Sheet as on April 1, 2019
| Liabilities | Amount (Rs.) |
|---|---|
| Trade Creditors | 3,000 |
| Bills Payable | 4,500 |
| Expenses Owing | 4,500 |
| General Reserve | 13,500 |
| Capitals: | |
| Radha | 15,000 |
| Sheela | 15,000 |
| Meena | 15,000 |
| Total | 70,500 |
| Assets | Amount (Rs.) |
|---|---|
| Cash-in-Hand | 1,500 |
| Cash at Bank | 7,500 |
| Debtors | 15,000 |
| Stock | 12,000 |
| Factory Premises | 22,500 |
| Machinery | 8,000 |
| Loose Tools | 4,000 |
| Total | 70,500 |
The terms were:
(a) Goodwill of the firm was valued at Rs. 13,500.
(b) Expenses owing to be brought down to Rs. 3,750.
(c) Machinery and Loose Tools to be valued at 10% less than their book value.
(d) Factory premises are to be revalued at Rs. 24,300.
After the goodwill of the firm is valued at Rs. 13,500, how should this amount be handled in the final accounts of the firm?
1
The goodwill amount is distributed among the partners according to their profit-sharing ratio
2
The goodwill is recorded as an expense in the profit and loss account
3
The goodwill amount is transferred to the revaluation reserve
4
The goodwill is deducted from the assets of the firm