Question

sita and geeta are partners sharing profits in the firm. machinery is given in balance sheet at 40000.if machinery is undervalued by 20% then what is value of machinery to be shown in new balance sheet ?​

Answer 1

Question :

To find the value of machinery to be shown in new balance sheet

Given :

• Value of Machinery in old balance Sheet = 40,000

• Undervalued Rate = 20%

Solution :

On the time of Revaluation of the assets and liabilities, they are revalued. Here, the amount of machinery is undervalued by 20%. Undervalued means decrease and Overvalued means Increase.

Let's See what value of Machinery to be shown in New balance sheet when new partners are admitted ;

⟶ Value Of Machinery × Undervalued Rate / 100

⟶ 40,000 × 20 / 100

⟶ 8,00,000 / 100

⟶ 8000

Undervalued Amount = 8000

⟶ Old Value Of Machinery - Undervalued Amount ( ' - ' less because of Decrease )

⟶ 40,000 - 8000

⟶ 32,000

∴ The value Of Machinery in new Balance Sheet = 32,000.