Question

A and B are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet shows Machinery at ₹ 3,00,000; Stock at ₹ 80,000 and Debtors at ₹ 1,60,000. C is admitted, and a new profit-sharing ratio is agreed at 6 : 9 : 5. Machinery is revalued at ₹ 2,40,000, and a provision is made for doubtful debts @ 5%. A’s share in the loss on revaluation amounts to ₹ 20,000. The revalued value of the Stock will be ______.

Options

• ₹ 42,000

• ₹ 1,28,000

• ₹ 38,000

• ₹ 1,18,000

Answer 1

A and B are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet shows Machinery at ₹ 3,00,000; Stock at ₹ 80,000, and Debtors at ₹ 1,60,000. C is admitted, and a new profit-sharing ratio is agreed at 6 : 9 : 5. Machinery is revalued at ₹ 2,40,000, and a provision is made for doubtful debts @ 5%. A’s share in the loss on revaluation amounts to ₹ 20,000. The revalued value of the Stock will be ₹ 1,18,000.

Explanation:

A’s share of loss on Revaluation = ₹ 20,000

Total Loss on Revaluation = `20,000 xx 3/2`

= ₹ 30,000

Loss on Revaluation of Machinery = 60,000

Provision for Doubtful Debts = `1,60,000 xx 5/100`

= 8,000

= 60,000 + 8,000

= 68,000

Since net loss on revaluation is ₹ 30,000, the Increase in the value of stock must be:

= 68 000 − 30 000

= ₹ 38 000

Revalued Value of Stock = 80,000 + 38,000

= ₹ 1,18,000