Question

At the time of dissolution of a partnership firm, the stock appeared in the books was Rs 35,000. One of the partner took over 50% of the stock at 10% less than its book value, and the remaining stock was sold at a gain of 15%. Find the total amount realized from the stock in cash.

• A. Rs 15,750
• B. Rs 17,500
• C. Rs 20,125
• D. Rs 35,875

Hint:

Stock taken over by a partner is not cash. Cash comes only from the half sold at 115% of its book value.

Answer 1

The Correct Option is C

Step 1: Understanding the Question:
The stock is Rs 35,000. Half is taken over by a partner and half is sold outside. We need only the cash received, so we must separate the two parts.

Step 2: Split the stock:
Half of 35,000 is 17,500. So the partner takes stock of book value Rs 17,500. The other stock of book value Rs 17,500 is sold.

Step 3: Stock taken over by the partner:
He takes it at 10% less than book value. So the value is 17,500 x 90/100 = Rs 15,750. This is not paid in cash. It is adjusted in his capital account, so it is not a cash realisation.

Step 4: Stock sold in the market:
It is sold at a gain of 15%. So the cash received is 17,500 x 115/100 = Rs 20,125. This comes in as cash.

Step 5: Check the options:
Rs 15,750 is only the partner's takeover value. Rs 17,500 is the book value of one half. Rs 35,875 adds the takeover value 15,750 and the cash 20,125, but the takeover is not cash. Rs 20,125 is the cash from the sale.

Final Answer:
Cash realised from the stock is Rs 20,125, which is option 3. \[\boxed{20{,}125}\]