Question

A and B are partners in a firm sharing profits and losses in the ratio of \(1:3\). C was admitted for \( \frac{1}{4} \)th share of profit. Machinery would be depreciated by \(20%\) (book value Rs.1,00,000) and building would be appreciated by \(10%\) (book value Rs.80,000), unrecorded debtors of Rs.2,000 would be brought in books. What was B's and C's share of revaluation?

• A. Rs.2,500, Rs.7,500
• B. Rs.7,500, Rs.2,500
• C. Rs.7,500, Rs.0
• D. Rs.0, Rs.7,500

Hint:

At the time of admission of a new partner: \[ \text{Revaluation Profit/Loss} \] is shared only by the old partners in their old profit-sharing ratio.

Answer 1

The Correct Option is C

Concept: At the time of admission of a new partner:
• Revaluation profit or loss is distributed among old partners only.
• The new partner does not get any share in past profits or losses. Hence, C will not receive any share of revaluation profit.

Step 1: Calculate decrease in value of machinery.
Book value of machinery: \[ Rs.1,00,000 \] Depreciation: \[ 20% \] Loss on revaluation: \[ = 1,00,000 \times \frac{20}{100} \] \[ = Rs.20,000 \]

Step 2: Calculate increase in value of building.
Book value of building: \[ Rs.80,000 \] Appreciation: \[ 10% \] Gain on revaluation: \[ = 80,000 \times \frac{10}{100} \] \[ = Rs.8,000 \]

Step 3: Record unrecorded debtors.
Unrecorded debtors brought into books: \[ Rs.2,000 \] This increases assets, therefore: \[ \text{Gain} = Rs.2,000 \]

Step 4: Calculate net revaluation profit/loss.
Total gains: \[ 8,000 + 2,000 = Rs.10,000 \] Total losses: \[ Rs.20,000 \] Net result: \[ 10,000 - 20,000 = -Rs.10,000 \] Thus, there is a net revaluation loss of: \[ Rs.10,000 \]

Step 5: Distribute revaluation loss among old partners.
Old profit-sharing ratio: \[ A : B = 1 : 3 \] Total ratio: \[ 1+3=4 \] B's share: \[ = 10,000 \times \frac{3}{4} \] \[ = Rs.7,500 \] C's share: \[ = Rs.0 \] because C is admitted after revaluation adjustments.

Step 6: Identify the correct option.
Thus: \[ \boxed{\text{B's share = Rs.7,500, C's share = Rs.0}} \] Hence, the correct answer is: \[ \boxed{(C)} \]