X, Y & Z are partners in a partnership firm. They decided to dissolve the firm for which firm borne the realisation expenses of ₹20,000. On the date of dissolution following information is available-
X's Capital = ₹5,00,000
Y's Capital = ₹5,00,000
Z's Capital = ₹3,00,000
Creditors = ₹2,00,000
Cash = ₹3,00,000
Profit and loss credit balance = ₹1,50,000
Loan to Y = ₹1,00,000
Land & building = ₹8,00,000
Investments = ₹2,00,000
Debtors = ₹1,00,000
Stock = ₹1,50,000
ADDITIONAL INFORMATION-
- Land & building sold at a profit of 12.5%.
- Debtors are realised at ₹90,000 whereas stock is realised at ₹1,40,000.
- X take over the investments for ₹1,90,000.
- All the creditors are paid by the firm on which firm got discount of 5%.
Pass the journal entry for the investments takeover.
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
X's capital A/c Dr. ₹1,90,000
To Realisation A/c ₹1,90,000
Investments is transferred to realisation account at the value of ₹2,00,000. After this it is takeover by X. So, journal entry will be-
X's capital A/c Dr. ₹1,90,000
To Realisation A/c ₹1,90,000.
It means X's capital is reduced by this amount as he took over the investments of this amount.