Question

A, B and C are partners sharing profits in 2 : 2 : 1. D was admitted with `1/5` th share of profits, and it was agreed that A would retain his original share. D brings his share of goodwill, ₹ 1,20,000 in Cash. The following balances appeared in their books at this date: Particulars Amount (₹) Amount (₹) Plant   3,00,000 Investments   2,00,000 Investment Fluctuation Reserve   20,000 Advertisement Suspense Account   60,000 Contingency Reserve   90,000 Capitals:     A   4,00,000 B   3,00,000 C   2,00,000 Sundry Debtors 1,26,000 1,18,000 Less: Provision for Doubtful Debts 8,000 It was agreed that: The plant is overvalued by 25%. The market value of Investments is ₹ 1,50,000. Bad-debts ₹ 6,000 be written off, and a provision for doubtful debts be maintained @ 10% on debtors. You are required to choose the correct option:

Loss on Revaluation will be:

Options

• ₹ 1,20,000

• ₹ 1,00,000

• ₹ 1,06,000

• ₹ 1,15,000

Answer 1

₹ 1,00,000

Explanation:

Dr.	REVALUATION ACCOUNT		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Plant (1)	60,000	By Loss on Revaluation tfd. to Capital A/cs	1,00,000
To Provision for Doubtful Debts (2)	10,000
To Investments (₹ 50,000 less reserve of ₹ 20,000)	30,000
	1,00,000		1,00,000

(1) Actual value of Plant = `3,00,000 xx 100/125`

= ₹ 2,40,000

Loss on Revaluation of Plant = 3,00,000 − 2,40,000

= ₹ 60,000

(2)

Particulars	Amount (₹)
Debtors	1,26,000
Less: Bad Debts	6,000
	1,20,000
Provision @ 10% on 1,20,000	12,000
Less: Existing Provision: ₹ 8,000 − Bad Debts ₹ 6,000	2,000
Amount Debited to Revaluation Account	10,000