Romesh took over stock at Rs. 8,100, which is 10% less than its book value. The book value of the stock was...........
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 9,000
A value that is 10% less than the book value is 90% of the book value. So the book value is found by dividing the agreed value by 90%.
Agreed value = 90% of book value = Rs. 8,100
Book value = Rs. 8,100 × 100/90 = Rs. 9,000
Adding 10% to Rs. 8,100 gives Rs. 8,910, which is wrong because the 10% is worked on the book value, not on Rs. 8,100.