Question

Ram and Shyam were partners, sharing profits and losses in the ratio of 3 : 2. Their balance sheet shows building at ₹ 1,60,000. They admitted Mohan as a new partner for 1/4th share. In additional information it is given that building is undervalued by 20%. The share of loss/gain of revaluation of Shyam is ______ & current value of building shown in new balance sheet is ______.

Options

• Gain ₹ 12,800, Value ₹ 1,92,000

• Loss ₹ 12,800, Value ₹ 1,28,000

• Gain ₹ 16,000, Value ₹ 2,00,000

• Gain ₹ 40,000, Value ₹ 2,00,000

Answer 1

Ram and Shyam were partners, sharing profits and losses in the ratio of 3 : 2. Their balance sheet shows building at ₹ 1,60,000. They admitted Mohan as a new partner for 1/4th share. In additional information it is given that building is undervalued by 20%. The share of loss/gain of revaluation of Shyam is ₹ 16,000 & current value of building shown in new balance sheet is ₹ 2,00,000.

Explanation:

Determine the True Market Value of the Building:

The book value (₹ 1,60,000) is stated as being undervalued by 20%. In standard accounting practice, this means the book value represents 80% of the actual market value.

Actual Value = `1,60,000 xx 100/80`

= 2,00,000

Calculate the Total Gain on Revaluation:

Total Gain = 2,00,000 − 1,60,000

= 40,000

Shyam’s Share of Gain = `40,000 xx 2/5`

= 16,000