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.
Answer & explanation
Correct answer: option 4
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