A partnership firm of partners X, Y and Z has the following assets and liabilities at the time of dissolution: Cash Rs. 80,000; Debtors Rs. 1,20,000; Stock Rs. 50,000; Machinery (book value) Rs. 1,80,000. Liabilities: Creditors Rs. 1,00,000; Bank loan Rs. 50,000. The machinery has a revaluation surplus of Rs. 30,000. The partners’ capital balances are X Rs. 2,00,000, Y Rs. 1,00,000 and Z Rs. 1,50,000. Profit‑sharing ratio is X:Y:Z = 3:2:1. Partner Z dies and is entitled to an 8% bonus on his capital. Prepare a Statement of Affairs showing net assets available for distribution and compute the cash each partner will receive on dissolution after adjusting for the revaluation surplus and Z’s bonus.

Step-by-step solution

1. Step 1: Compute total assets. $\text{Total assets}=80,000+1,20,000+50,000+1,80,000=3,90,000$
2. Step 2: Compute total liabilities. $\text{Total liabilities}=1,00,000+50,000=1,50,000$
3. Step 3: Calculate net assets before adjustments. $\text{Net assets}=3,90,000-1,50,000=2,40,000$
4. Step 4: Add revaluation surplus on machinery. Since the fair value exceeds book value by Rs. 30,000, this amount increases the net assets. $\text{Adjusted net assets}=2,40,000+30,000=2,70,000$
5. Step 5: Compute bonus for partner Z. Bonus = 8% of his capital = 0.08 × 1,50,000 = 12,000. The firm has to pay this bonus out of the net assets. $\text{Net assets after bonus}=2,70,000-12,000=2,58,000$
6. Step 6: Split the remaining net assets among the partners in the profit‑sharing ratio 3:2:1. Total ratio sum = 3+2+1 = 6. Each unit = 2,58,000 ÷ 6 = 43,000.
7. Step 7: Cash for each partner:
8. • X: 3 × 43,000 = 1,29,000
9. • Y: 2 × 43,000 = 86,000
10. • Z: 1 × 43,000 = 43,000
11. Step 8: Add Z’s bonus to his cash receipt. $\text{Z’s total cash}=43,000+12,000=55,000$
12. Final cash distribution: X receives Rs. 1,29,000, Y receives Rs. 86,000 and Z receives Rs. 55,000.

Concept tested: Statement of Affairs and bonus adjustment

Published 28 September 2026 · How this solution was prepared and checked