1
Question
X, Y and Z are partners sharing profits in the ratio of 5:3:2. They decide to share future profits in the ratio of 2:3:5 with effect from 1st April, 2018 . They also decide to record the effect of following revaluation without affecting the book values of assets and liabilities, by passing single adjusting entry :
Book Value (Rs.) Revised Value (Rs.) Land and Building 3,00,000 4,50,000 Plant and Machinery 4,50,000 4,20,000 Trade Creditors 1,50,000 1,35,000 Outstanding Rent 1,35,000 1,80,000
The necessary single adjustment entry will be:
X, Y and Z are partners sharing profits in the ratio of 5:3:2. They decide to share future profits in the ratio of 2:3:5 with effect from 1st April, 2018 . They also decide to record the effect of following revaluation without affecting the book values of assets and liabilities, by passing single adjusting entry :
| Book Value (Rs.) | Revised Value (Rs.) | |
| Land and Building | 3,00,000 | 4,50,000 |
| Plant and Machinery | 4,50,000 | 4,20,000 |
| Trade Creditors | 1,50,000 | 1,35,000 |
| Outstanding Rent | 1,35,000 | 1,80,000 |
Open in App
Solution
The correct option is C Dr. Z and Cr. X by Rs. 27,000.
To get the adjustment entry done, first need to find out the profit /loss on revaluation. Since books of account are not to be affected due to revaluation, hence an adjustment entry need to be passed:
Revaluation difference can be calculated as:
Particulars Book Value Revised Value Gain/Loss
Land & Building 300000 450000 150000Plant & Machinery 450000 420000 - 30000Trade Creditors 150000 135000 15000Outstanding Rent 135000 180000 -45000 ------------------ Net Gain on Revaluation 90000 -------------------
Share on revaluation: X Y ZAs per old Ratio 45000 27000 18000As per New Ratio 18000 27000 45000 -------------- -------------- --------------Sacrifice/Gain 27000 NIL -27000 ------------- --------------- ---------------Hence below adjustment entry will be passed:
Z's A/c Dr. 27000 To X's A/c 27000
To get the adjustment entry done, first need to find out the profit /loss on revaluation. Since books of account are not to be affected due to revaluation, hence an adjustment entry need to be passed:
Revaluation difference can be calculated as:
Particulars Book Value Revised Value Gain/Loss
Land & Building 300000 450000 150000
Plant & Machinery 450000 420000 - 30000
Trade Creditors 150000 135000 15000
Outstanding Rent 135000 180000 -45000
------------------
Net Gain on Revaluation 90000
-------------------
Share on revaluation: X Y Z
As per old Ratio 45000 27000 18000
As per New Ratio 18000 27000 45000
-------------- -------------- --------------
Sacrifice/Gain 27000 NIL -27000
------------- --------------- ---------------
Hence below adjustment entry will be passed:
Z's A/c Dr. 27000
To X's A/c 27000
Suggest Corrections
0
Similar questions