Partnership Revaluation and Retirement Adjustment

Steps:

• Revalue net assets upward by $10,000, shared in 5:3:2 ratio (X: 5/10 ×$10,000 = $5,000; Y: 3/10 ×$10,000 = $3,000; Z: 2/10 ×$10,000 = $2,000).
• Adjust capitals: X $40,000 +$5,000 = $45,000; Y$30,000 + $3,000 =$33,000; Z $20,000 +$2,000 = $22,000.
• Z retires; his $22,000 is settled separately (paid out or transferred), leaving X and Y's capitals unchanged.
• X's final capital balance is $45,000, as new 3:2 ratio applies post-retirement without further adjustment.

Why D is correct:

• Under partnership accounting (IAS 28 or equivalent), revaluation gains accrue to partners' capitals in old ratio before retirement, directly increasing X's by $5,000 to$45,000.

Why the others are wrong:

• A: Ignores revaluation gain entirely, understating X's share.
• B: Confuses with Y's original capital, not X's adjusted amount.
• C: Misapplies ratio (e.g., 3:2 instead of 5:3:2 for gain), yielding incorrect $1,000 adjustment.

Final answer: D