Ram and Shyam are partners sharing profits/losses equally. They admitted Radha into partnership for 1/3rd share. At the time of her admission, the book value of Machinery was ₹1,35,000. It was provided at the time of admission that the Machinery was undervalued by 10%. Show its impact on Revaluation A/c?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Revaluation A/c is credited by ₹15,000.
Book value of machinery = 1,35,000
Undervalued = 10%.
Real value = 1,35,000 x 100/90
= 1,50,000
Undervaluation amount = 1,50,000 - 1,35,000
= 15,000
As machinery is undervalued so it is gain for the firm. Revaluation is credited with the gain value of 15,000.