Question

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

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

If the value of machinery reflected in the balance sheet is overvalued by `33 1/3%,` find out the value of Machinery to be shown in the new Balance Sheet.

Options

• ₹ 44,000

• ₹ 48,000

• ₹ 32,000

• ₹ 30,000

Answer 1

₹ 30,000

Explanation:

The overvaluation percentage:

`33 1/3%,`

= `100/3%`

= `100/300`

= `1/3`

Let the actual, correct value of the machinery be X.

The Balance Sheet Value = Actual Value + Overvaluation Amount

40,000 = X + (Overvaluation Amount × x)

40,000 = `X + (1/3 xx X)`

40,000 = `X + X/3`

Combine the terms on the right side:

40,000 = `(3X + X)/3`

40,000 = `(4X)/3`

X = `40,000 xx 3/4`

X = `10,000 xx 3`

X = 30,000

The value of Machinery to be shown in the new Balance Sheet is ₹ 30,000.