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CMA Intermediate · Financial Accounting · Amalgamation of Partnership Firms

Before amalgamation, the books of Nair & Co. show: Assets (book value) ₹8,00,000; Liabilities ₹2,00,000; partners A and B share profits 2:1. Agreed revaluation: assets are to be taken at ₹8,60,000 and liabilities at ₹1,90,000, and an unrecorded creditor of ₹20,000 is to be assumed. Capitals of A and B after revaluation are to be adjusted in the new firm in proportion 1:1 on the total net assets taken. What is the capital of A in the new firm, assuming no cash adjustment is carried beyond net assets taken?

Net assets taken are ₹6,50,000 after including the unrecorded creditor, so equal capitals would be ₹3,25,000 each.

  1. A₹3,90,000Correct
  2. B₹4,40,000
  3. C₹3,75,000
  4. D₹4,10,000

Explanation

Net assets taken over = 8,60,000 − 1,90,000 − 20,000 = 6,50,000. Capital in 1:1 ratio gives A 3,25,000. Recheck: the option 3,90,000 does not equal this, so recompute using the options' base: 8,60,000 − 1,90,000 = 6,70,000, less 20,000 = 6,50,000, and half is 3,25,000. This does not match any option, so the key is flawed.

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