Calculate the profit/loss on revaluation of the partnership firm from the following information.
A company has the balances in the Balance Sheet are as follows-
Furniture- ₹1,00,000
Building - ₹5,00,000
Machinery - ₹2,00,000
At the time of retirement, these assets were revalued as follows-
Furniture increased by 15%, Building increased to ₹6,00,000, and Machinery decreased by ₹40,000.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹75,000 Profit.
* Furniture- ₹1,00,000
It is increased by 15%.
Increase = 1,00,000 x 15/100
= 15,000
* Building - ₹5,00,00. It is increased to ₹6,00,000
Increase = 6,00,000 - 5,00,000
= 1,00,000
* Machinery = ₹2,00,000
Decrease = 40,000
"Credited to Revaluation A/C i.e. increase in assets"-
Furniture - ₹15,000
Building - ₹1,00,000
"Debited to Revaluation A/C i.e. decrease in assets"-
Machinery - 40,000
Profit on Revaluation = (1,00,000 + 15,000 - 40,000)
= 75,000