Question

At the time of dissolution Machinery appears at ₹ 10,00,000 and accumulated depreciation for the machinery appears at ₹ 6,00,000 in the balance sheet of a firm. This machine is taken over by a creditor of ₹ 5,40,000 at 5% below the net value. The balance amount of the creditor was paid through bank. By what amount should the bank account be credited for this transaction?

Options

• ₹ 60,000

• ₹ 1,60,000

• ₹ 5,40,000

• ₹ 4,00,000

Answer 1

₹ 1,60,000

Explanation:

Calculate the Net Value of Machinery:

Net Book Value of Machinery = Original value – Accumulated depreciation of Machinery

= 10,00,000 – 6,00,000

= 4,00,000

Creditor takes over machinery at 5% below the net value:

5% below the net value = 5% of ₹ 4,00,000 = ₹ 20,000

Creditor takes over machinery = ₹ 4,00,000 – 20,000

= ₹ 3,80,000

Balance amount to be paid = ₹ 5,40,000 – 3,80,000

= ₹ 1,60,000