Question : Arrange the following steps in proper sequence When the Retiring Partner is to be paid through amount brought by the Remaining or Continuing partners in a manner to make their Capitals Proportionate to their New Profit-sharing Ratio and also leave a desired Cash Balance 1. Calculate Adjusted Capital of the remaining partners, i.e., after making adjustments for goodwill, reserves, accumulated profits/losses and gain or loss on revaluation 2. Calculate New Capital of each remaining partner as follows: Total Capital of the New Firm) $\times$ New Profit Share. 3. Calculate Surplus Capital or Deficit Capital by comparing the New Capital and Adjusted Capital 4. Calculate Total Capital of the new firm as follows: Aggregate of Adjusted Capital of Remaining Partners + Shortage of amount to be brought in by Remaining partners to pay the retiring partner (i.e., Amount payable to retiring partner - Existing Cash Balance) + Minimum Cash Balance Required
Option 1: I,II,III,IV
Option 2: I,II,IV,III
Option 3: I,III,II,IV
Option 4: None of the above
Correct Answer: None of the above
Solution : Answer = None of the above (I), (IV), (II), (III)
The correct sequence of steps, when a Retiring Partner is to be paid through the amount brought by the Remaining or Continuing partners, is as follows:
(i) Calculate Adjusted Capital of the remaining partners,
(iv) Calculate Total Capital of the new firm,
(ii) Calculate the New Capital of each remaining partner,
(iii) Calculate Surplus Capital or Deficit Capital. Hence, the correct option is 4.
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