Question

Ritu, Geetu and Sara are partners in a firm, sharing profits and losses in the ratio of 3 : 2 : 1. An extract of their Balance Sheet as at 31^st March, 2021, is as under:

Balance Sheet of Ritu, Geetu and Sara (extract) As at 31st March, 2021
Liabilities	(₹)	Assets	(₹)
		Plant & Machinery	90,000

On Geetu’s retirement on 1^st April, 2021, it was found that the value of machinery shown in the balance sheet overvalued by `33 1/3`%.

What is the revised value of Plant & Machinery shown in the Balance Sheet of the reconstituted firm?

Answer 1

Given:

Value of Plant & Machinery shown in Balance Sheet = ₹ 90,000

It was overvalued by 33`1/3`% (i.e. 1/3)

When an asset is overvalued by 33`1/3`%, it means the book value is 4/3 of the real value.

True (Revised) Value = 90,000 × `3/4` = 67,500

Revised value of Plant & Machinery = ₹ 67,500