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Question

Book Value of assets (other than cash and bank) transferred to Realisation Account is Rs. 1,00,000. 50% of the assets are taken over by a partner atul, at a discount of 20%, 40% of the remaing assets are sold at a profit of 30% on cost; 5% of the balance being obsolete, realised nothing and remaing assets are handed over to a Creditor, in full settlement of his claim.
You are required to record the Journal entires for realisation of assets.

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Solution

1. Realisation A/C.... Dr. 100000
To Sundry Assets A/C 100000
(Being assets transferred to Realisation account)

2. Atul's Capital A/C..... Dr. 40000
To Realisation A/C 40000
(Being assets taken over by Atul)
[ Note: 50%of 100000= 50000
Discount= 20% of 50000= 10000
Hence, value after discount= 50000-10000
= 40000]

3. Bank A/C.... Dr. 26000
To Realisation A/C 26000
(Being assets sold)
[ Note: 40% of 50000= 20000
Profit= 30% of 20000= 6000
Hence, value after profit= 20000+6000
= 26000]

4. No entry is passed since creditors are handed over obsolete assets in full settlement of their claim.

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