Practicing Success
At the time of reconstitution of the firm, following information is found out - Fixed Assets revalued at 2,00,000 (Book value 1,80,000) Amount distributed to the partners will be - |
₹20,000 debited to Partner's Account ₹20,000 credited to Partner's Account ₹18,000 debited to Partner's Account ₹18,000 credited to Partner's Account |
₹18,000 credited to Partner's Account |
The correct answer is option 4- ₹18,000 credited to Partner's Account. Profits on Fixed asset = 1,80,000 - 2,00,000 (Value increased) Unrecorded Investment = 10,000 (profit as asset is increased) Unrecorded outstanding bill = 7,000 (Loss as liability is increased) Bad Debts - 5,000 (Loss as liability is increased) Profits on Revaluation = Profit of fixed asset + Unrecorded investment - O/S bill - Bad debts 18,000 will be credited to partners in their old profit sharing ratio. |