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)
Bad Debts of Rs 5,000 ( Debtors Book Value - 50,000)
Unrecorded investment of Rs 10,000
Unrecorded outstanding bill of Rs 7,000.
Amount distributed to the partners will be -
Answer & explanation
Correct answer: option 4
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)
= 20,000
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
= 20,000 +10,000 - 7,000 - 5,000
= 30,000 - 12,000
= 18,000
18,000 will be credited to partners in their old profit sharing ratio.