Question

Arun and Vijay are partners in a firm sharing profits and losses in the

ratio of 5:1.

Balance Sheet (Extract)

Liabilities ₹ Assets ₹

Machinery 40,000

If the value of machinery reflected in the balance sheet is overvalued by

33 %, find out the value of Machinery to be shown in the new Balance

Sheet:

(A) ₹ 44,000

(B) ₹48,000

(C) ₹ 32,000

(D) ₹30,000​

Answer 1

(D) ₹30,000​

Explanation:

Answer 2

Given:

Profit/ loss sharing ratio=5:1

Value of machinery in books= Rs. 40,000

Overvaluation percent=33%

To find:

Value of machinery to be shown in the new balance sheet

Solution:

We can find the solution by following the given steps-

We know that the ratio given is irrelevant to finding the value of machinery.

The value of machinery is overvalued by 33%.

So, we will determine its actual value to be shown.

Let us assume that the actual value is X.

It is overvalued by 33% so now it is 100+33%.

=1+1/3

=4/3 of the actual value

So, 4X/3= 40,000

X/3= 10,000

X=30,000

Therefore, the value to be shown in the new balance sheet is Rs. 30,000.