Abhijith and Binoy are college mates after completion of their studies they started a business of manufacturing pickles. They are sharing profits in the ratio of 3:1. Their balance sheet as at 31st March 2020 was as follows.
On this date Chandru was admitted in to partnership for 1/8th share in profits. He brought Capital and goodwill premium in cash. At the time of admission of Chandru the firm revalued the assets and reassessed the liabilities and found the following.
1. Stock was overvalued by ₹4,000
2. Furniture is to be depreciated by 10% and Land to be appreciated by 20%. Provision for doubtful debts is to be created @5% on debtor
3. Provision for damages is to be made at ₹3, 000.
Based on above information answer the following:
1. What will be the result of revaluation A/c
a) Gain on revaluation ₹ 68,400
b) Gain on revaluation ₹ 48600
c) Gain on revaluation ₹ 50,600
d) Gain on revaluation ₹ 66,000
2. What is the correct treatment entry of provision for damages?
a) Revaluation A/c Dr 3,000 To Provision for damages A/c 3,000
b) Provision for damages A/c Dr 3,000 To Revaluation A/c 3,000
c) Liability A/c Dr 3,000 To Revaluation A/c 3,000
d) Liability A/c Dr 3,000 To Provision for damages 3,000
3. What is the amount of stock will show in the new Balance Sheet?
a) 2,68,000
b) 2,64,000
c) 2,60,000
d) 2,72,000
4. What will be the new ratio?
a) 3:7:4
b) 7:21:3
c) 1:1:1
d) 21:7:4
