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?

₹98,000

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