Question: X and Y are equal partners. On 1st July, 1962, they agree to admit Ζ as partner. Ζ is to pay £2,000 as a premium-the money to be left in the business-and to contribute £5,000 as capital. The Balance Sheet of the old firm as at 30th June, 1962, was as follows:
It was agreed, after negotiation between the parties, that the following adjustments in book values were to be made:
£
(a) Freehold Property to be valued at 11,000
(b) Plant and Machinery to be reduced to 5,750
(c) Bad Debts to be written off" 850
(d) Stock revalued at 5,750
Reserve Account to be transferred to Revaluation Account. Prepare Revaluation Account and Balance Sheet of new firm as at 1st July, 1962.