Question

A and B are partners sharing profits in the ratio of 2 : 3. Their Balance Sheet shows Machinery at ₹ 2,00,000; 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 ₹ 1,40,000 and a provision is made for doubtful debts @ 5%. A’s share in the loss on revaluation amounts to ₹ 20,000. Revalued value of Stock will be ______.

Options

• ₹ 62,000

• ₹ 1,00,000

• ₹ 60,000

• ₹ 98,000

Answer 1

A and B are partners sharing profits in the ratio of 2 : 3. Their Balance Sheet shows Machinery at ₹ 2,00,000; 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 ₹ 1,40,000 and a provision is made for doubtful debts @ 5%. A’s share in the loss on revaluation amounts to ₹ 20,000. Revalued value of Stock will be ₹ 98,000.

Explanation:

Calculate the Total Loss on Revaluation:

A’s share of the revaluation loss is given as ₹ 20,000.

A’s share of profit/loss in the old ratio = `2/5`

Let the total loss be x.

`x xx 2/5 = 20,000`

x = `(20,000 xx 5)/2`

x = `(1,00,000)/2`

x = 50,000

B’s share in total loss = `50,000 xx 3/5`

= 30,000

Provision for doubtful debts = `1,60,000 xx 5/100`

= 8,000

Revaluate value of stock = 80,000 + 18,000

= 98,000

Dr.	Revaluation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Machinery A/c		60,000	By Stock A/c		18,000
To Provision for doubtful debts		8,000	By Transfer Loss to Capital A/c		50,000
			A	20,000
			B	30,000
		68,000			68,000