Valuation of Land and Building

[tex]\[
\text{New Value} = \frac{\text{Book Value}}{100+20} \times 100 = \frac{84,000}{120} \times 100 = ₹ 70,000
\][/tex]

There is a decrease in the value of Plant and Machinery by ₹ 14,000.

PROBLEMS FOR PRACTICE

1. The following is the Balance Sheet of Ram and Laxman who share profits in the ratio of [tex]$3:2$[/tex] respectively, as on [tex]$1^{\text{st}}$[/tex] April, 2020.

Balance Sheet

[tex]\[
\begin{array}{|l|r|l|r|}
\hline
\text{Liabilities} & \text{Amount} (₹) & \text{Assets} & \text{Amount} (₹) \\
\hline
\text{Creditors} & 15,000 & \text{Plant and Machinery} & 16,000 \\
\text{General Reserve} & 11,000 & \text{Stock} & \text{---} \\
\text{Capital Accounts:} & \text{---} & \text{Furniture} & \text{---} \\
\quad \text{Ram} & 30,000 & \text{Debtors} & \text{---} \\
\text{Laxman} & 20,000 & \text{Cash at Bank} & \text{7,000} \\
\hline
\text{Total} & 76,000 & \text{Total} & \text{---} \\
\hline
\end{array}
\][/tex]

On this date, Bharat was admitted on the following terms:

1. He had to pay ₹ 21,000 as his capital and ₹ 17,000 as his share of goodwill for [tex]$\frac{1}{5}^{\text{th}}$[/tex] of future profits.
2. The amount of goodwill will be retained in the business.
3. Plant and Machinery and Stock to be depreciated at [tex]$10\%$[/tex] and [tex]$5\%$[/tex] respectively.