Multiple Choice Questions on A and B are partners sharing profits in the ratio of 2 3 Their Balance Sheet shows Machinery at Rs2 ........... for Commerce 12th Preparation

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Multiple Choice Questions

A and B are partners sharing profits in the ratio of 2 3 Their Balance Sheet shows Machinery at Rs2 ...........

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    A and B are partners sharing profits in the ratio of 2 : 3. Their Balance Sheet shows Machinery at Rs2,00,000; Stock at Rs80,000 and Debtors at Rs1,60,000. C is admitted and new profit sharing ratio is agreed at 6 : 9 : 5. Machinery is revalued at Rs1,40,000 and a provision is made for doubtful debts @5%. A’s share in loss on revaluation amount to Rs20,000. Revalued value of Stock will be :

    Rs62,000

    Incorrect Answer

    Rs1,00,000

    Incorrect Answer

    Rs60,000

    Incorrect Answer

    Rs98,000

    Correct Answer
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    Explanation:

    - A and B had a profit-sharing ratio of 2:3.

    - Revaluation adjustments are made: Machinery is down from Rs2,00,000 to Rs1,40,000.

    - A provision of 5% for doubtful debts is Rs8,000 (5% of Rs1,60,000).

    - A's share in the loss is Rs20,000, which suggests a total loss of Rs50,000 on revaluation (A's share is 2/5 of the total loss).

       Loss due to provision of 5% for doubtful debts =  Rs8,000 (5% of Rs1,60,000)

    - Loss from machinery revaluation is Rs60,000 (Rs2,00,000 - Rs1,40,000

       50,000 - 60,000 - 8,000 = - 18,000 (Gain on stock)

    - The revalued stock, therefore, is Rs80,000 (original) + Rs18,000 (gain) = Rs98,000.

    By: santosh
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