At the time of reconstitution of firm, Building was appearing in Old Books at a certain amount, which was overvalued by 20%. After reconstitution, Building appeared in the Books at ₹4,00,000. Determine the amount at which Building was appearing in Books before reconstitution.

₹4,80,000

The correct answer is option 4- ₹4,80,000.

Overvalue = 20%
After reconstitution value = 4,00,000 (does not include overvalued amount)

Let old value = a
a X 100/120 = 4,00,000
a = 4,00,000 x 120/100
a = 4,80,000

It can also be done like this-

Actual value = 4,00,000
Overvalue = 20%
Overvaluation amount = 4,00,000 x 20/100
                                 = 80,000

Old value = Actual value + overvalue amount
              = 4,00,000 + 80,000
              = 4,80,000