question_answer

You are required to answer the following questions 38 to 43:

Gagan from Punjab and Abhiraj from Rajasthan started a business in partnership 3 years back. They share profits in the ratio of 3:2. With a view to Expand their business they decided to admit a new partner Akshit from Delhi for 1/4th share in future profits which he acquires equally from Gagan and Abhiraj. At the time of admission, the Balance Sheet stood as follows:

Liabilities Amount Assets Amount Capital A/cs:   Land and Building 3,30,000 Gagan                                   3,80,000   Machinery 2,00,000 Abhiraj                                  2,20,000 6,00,000 Motor car 1,20,000 Workmen Compensation Reserve 1,80,000 Stock 35,000 Investment Fluctuation Reserve 10,000 Debtors                                 43,000   Creditors 30,000 Less: Provision for       Doubtful debts                       2,000 41,000     Current Investment 80,000     Bank 14,000   8,20,000   8,20,000

Akshit bring Rs.4,75,000 as his capital and Rs.25,000 as his share of goodwill. Following adjustments to be considered:

(i) Land and Building was overvalued by 10 %. Motor Car is to be reduced by 15 %. Machinery to be appreciated by 20%.

(ii) Stock includes an obsolete item of Rs.3,000 to be written off. Investment revalued at Rs.90,000 and Creditors Rs.8,000 not likely to be paid.

(iii) Bad debts of Rs.1,000 to be written off. Provision to be created on debtor for 5%.

(iv) There was a claim of Rs.2,00,000 against the workmen compensation reserve out of which Claim of Rs.1,65,000 accepted by the firm.

Amount of Land and Building to be shown in Revaluation Account:

 

A) Credit side of Revaluation Account Rs.33,000

B) Credit side of Revaluation Account Rs.30,000

C) Debit side of Revaluation Account Rs.33,000

D) Debit side of Revaluation Account Rs.30,000