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  5. Change in Profit Sharing Ratio Among Existing Partner

12th Class Accountancy Change in Profit Sharing Ratio Among Existing Partner Question Bank Case Based - Reconstitution Of a Partnership Firm : Change in Profit Sharing Ratio

  • question_answer
    Read the following hypothetical text and answer the given questions:
    Raj, Taj and Naz are partners engaged in the business of selling frozen food items sharing profits and losses equally.
    As there was need of funds to purchase more refrigerators, Raj bought additional capital of? 1,50,000 in the firm. Raj demanded that his share in profit should be increased as he bought additional capital to which rest of the partners agreed From 1st April, 2019, they decided to share profits in the ratio of 2 : 1 : 1, At the time of reconstitution, the following assets and liabilities are revalued and reassessed:
    Items Book Figure Revised Figure
    Freehold Premises 7,50,000 8,00,000
    Stock 2,25,000 2,00,000
    Debtors 75,000 72,500
    Furniture 1,00,000 90,000
    Creditors 30,000 25,000
    Based on the above information you are required to answer the following questions:
    Profit on revaluation will be:
     

    A) Rs. 7,500             

    B) Rs. 92,500

    C) Rs. 17,500           

    D) Rs. 18,500

    Correct Answer: C

    Solution :

    [c] Rs. 17,500
    Hint: Net Effect of Revaluation:
    Profit due to increase in the value of                                        (Rs.)
    freehold premises                                                               = 50,000
    Profit due to decrease in the value of creditors                      =   5,000
    Loss due to fall in the value of stock, debtors and furniture    = (37,500)
    Profit on revaluation                                                                17,500
     


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