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Arun and Vijay are partners in a firm sharing profits and losses in the ratio of 5 : 1. If value of machinery in the balance sheet is undervalued by 20%, -

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Question

Arun and Vijay are partners in firm sharing profits and losses in the ratio of 5 : 1.

Balance Sheet (Extract)
Liabilities Amount (₹) Assets Amount (₹)
    Machinery 40,000

If the value of machinery in the balance sheet is undervalued by 20%, then at what value will machinery be shown in a new balance sheet?

Options

  • ₹ 44,000

  • ₹ 48,000

  • ₹ 32,000

  • ₹ 50,000

MCQ

Solution

₹ 50,000

Explanation:

x - 20% of x = ₹ 40,000

= x - `1/5`x = ₹ 40,000

`= 4/5` x  ₹ 40,000

x = ₹ `40,000 xx 5/4`

x = ₹ 50,000

therefore, the value of machinery is ₹ 50,000.

shaalaa.com
Accounting for Revaluation of Assets and Reassessment of Liabilities
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