Question

At the time of dissolution of a firm, the firm’s total assets were ₹ 5,00,000, creditors were ₹ 1,00,000. Realisation expenses amounted to ₹ 10,000. Assets realised 20% more than the book value and creditors were paid 5% less. Gain/loss on realisation will be ______.

Options

• Gain ₹ 95,000

• Loss ₹ 75,000

• Gain ₹ 4,95,000

• Loss ₹ 1,00,000

Answer 1

At the time of dissolution of a firm, the firm’s total assets were ₹ 5,00,000, creditors were ₹ 1,00,000. Realisation expenses amounted to ₹ 10,000. Assets realised 20% more than the book value and creditors were paid 5% less. Gain/loss on realisation will be gain ₹ 95,000.

Explanation:

Asset Realisation Value = `5,00,000 + 20/100 xx 5,00,000`

= 5,00,000 + 1,00,000

= ₹ 6,00,000

Creditors Paid = `1,00,000 - 5/100 xx 1,00,000`

= 1,00,000 − 5,000

= 95,000

Total Debit Side = Sundry Assets + Cash (Creditors Paid) + Cash (Realisation Expenses)

= 5,00,000 + 95,000 + 10,000

= ₹ 6,05,000

Total Credit Side = Sundry Creditors + Cash (Assets Realised)

= 1,00,000 + 6,00,000

= 7,00,000

Gain on Realisation = Total Credit Side − Total Debit Side

= 7,00,000 − 6,05,000

= 95,000