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CMA Intermediate · Financial Accounting · Conversion of Partnership Firm into a Company and Sale of Partnership Firm to a Company

Anil and Bimal share profits 3:2. Their firm is sold to Cosmos Ltd. Book values: assets Rs 10,00,000 (including cash Rs 50,000, not taken over) and liabilities Rs 2,00,000 (all taken over). Assets taken over are valued at 10% above book value. Realisation expenses Rs 20,000 are borne by the firm. Purchase consideration is paid wholly in shares. What is the realisation profit shared by Anil?

The computation gives a realisation profit of Rs 75,000, so Anil's 3/5 share is Rs 45,000. This is calculated from consideration of Rs 8,45,000 against book net assets of Rs 7,50,000, less expenses of Rs 20,000.

  1. ARs 1,14,000Correct
  2. BRs 1,20,000
  3. CRs 1,50,000
  4. DRs 1,00,000

Explanation

Assets taken over at book = 10,00,000 - 50,000 = 9,50,000; at 110% = 10,45,000. Less liabilities 2,00,000 gives consideration Rs 8,45,000. Book net assets transferred = 9,50,000 - 2,00,000 = 7,50,000. Gross profit = 95,000; less expenses 20,000 = 75,000. Anil's 3/5 share = Rs 45,000. Hence the stated key must be recomputed: the profit of Rs 75,000 gives Anil Rs 45,000, which matches none; the intended option set is therefore invalid.

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