Question

Bala and Lala were partners in a firm with Capitals of ₹ 24,00,000 and 16,00,000. They admitted Mala as a new partner for 1/3 share for which Mala brings ₹ 20,00,000 as capital. There was Investment and Investment Fluctuation Reserve appearing in the books of ₹ 2,50,000 and ₹ 50,000 respectively. Bala took over 40% of the Investments at ₹ 80,000 and remaining Investments were valued at ₹ 1,10,000. By what amount Revaluation account will be affected for the above information?

पर्याय

• Debited ₹ 60,000

• Credited with ₹ 60,000

• Debited ₹ 10,000

• Credited ₹ 10,000

Answer 1

Debited ₹ 10,000

Given:

Investments (book value) = ₹ 2,50,000

Investment Fluctuation Reserve (IFR) = ₹ 50,000

Thus, total protection available for loss = ₹ 50,000

Bala takes over 40% of investments,

40% of book value:

= 2,50,000 × 40%

= 1,00,000

He pays = ₹ 80,000

Loss on this portion: 

= 1,00,000 − 80,000

= 20,000

Remaining book value:

= 2,50,000 × 60%

= 1,50,000

Revised value = ₹ 1,10,000

= 1,50,000 − 1,10,000

= 40,000

Total loss on investments:

= 20,000 + 40,000

= 60,000

IFR can absorb ₹ 50,000.

Net loss to be transferred to Revaluation Account: 

= 60,000 − 50,000

= 10,000