Question

At the time of dissolution of a firm, Furniture appeared at ₹ 4,50,000 in the firm’s Balance Sheet. One of the creditors to whom an amount of ₹ 4,00,000 was due agreed to take over the Furniture at 20% less than the book value and to pay the remaining amount by cheque.

Calculate the amount to be paid to the creditor by cheque.

Answer 1

The creditor agrees to take the furniture at 20% less than its book value of ₹ 4,50,000.

Discount = `4,50,000 xx 20/100`

= 90,000

Agreed Value = Book Value − Discount

= 4,50,000 − 90,000

=  3,60,000

Amount paid by cheque = Total Debt − Agreed Value of Furniture

= 4,00,000 − 3,60,000

= 40,000