Based on following Balance Sheet of Tarnav and Manav as at 31st March 2022, answer question:
Balance Sheet as at 31st March 2022
|
Liabilities |
₹ |
Assets |
₹ |
|
Sundry Creditors |
30,000 |
Cash at Bank |
13,000 |
|
80,000 |
|
80,000 |
On that date the firm was dissolved on the following term:
(i) Tarnav promised to pay Sanjay's loan and took over stock in trade at ₹4,000.
(ii) Creditors payable after one month, were paid immediately at 6% discount.
(iii) Debtors of ₹1,000 proved bad, plant realised 130%.
(iv) Expenses on Realisation were ₹1,500 borne and paid by Manav.
(v) Manav took over an old computer completely written off from the book at ₹500.
Calculate amount paid to creditors.
Answer & explanation
Correct answer: option 1
The correct answer is Option 1 - ₹29,850.
Creditors = ₹30,000
Discount = 6%
Discount = 30,000 x 6/100 × 1/12
= ₹150
Paid amount to creditors = 30,000 - 150
= ₹29,850
Note-The creditors were payable after one month but were settled immediately at a discount of 6%. In such accounting questions, the discount rate is interpreted as an annual rate applicable only for the unexpired credit period. Therefore, the discount is calculated proportionately for one month and not as a flat 6% on the entire amount. Accordingly, the discount amounts to ₹150 and the amount paid to creditors is ₹29,850.