A and B are partners sharing profits in the ratio of 2 : 3. The Balance Sheet shows Machinery at ₹2,00,000; Stock at ₹80,000 and Debtors at ₹1,60,000. C is admitted and new profit sharing ratio is agreed at 6 : 9 : 5. Machinery is revalued at ₹1,40,000 and a provision is made for doubtful debts @5%. A's share in loss on revaluation amount to ₹20,000. What will be the revalued value of Stock?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹98,000.
Machinery is revalued at 1,40,000 from 2,00,000 which means there is a decrease of 60,000 in machinery value.
Provision is made for 5% means provision = 1,60,000 x 5/100
= 8,000
The journal entry passed for both of these is as follows-
Revaluation A/c Dr. 68,000
To Machinery A/c 60,000
To Provision for doubtful debts 8,000
A's share in revaluation loss = 20,000
A share in loss = 2/5
2/5 = 20,000
Whole loss = 20,000 x 5/2
= 50,000
This, 50,000 is distributed between A & B in 2:3. The journal for this is as follows-
Loss on revaluation A/c Dr. 50,000
To A' capital A/c 20,000
To B capital A/c 30,000
Therefore, Increase in stock = 68,000 - 50,000
= 18,000
Revalued stock = 80,000 + 18,000
= 98,000