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CMA Intermediate · Financial Accounting · Amalgamation of Partnership Firms

Firm M has a Realisation Account in which assets taken over are debited Rs 6,00,000 and liabilities taken over are credited Rs 1,50,000. The purchase consideration is Rs 5,10,000. Partners M1 and M2 share profits 3:2. What is the profit on realisation credited to M1?

M1 receives Rs 36,000. The profit on realisation is the purchase consideration of Rs 5,10,000 less net assets of Rs 4,50,000, which is Rs 60,000, and it is shared 3:2, so M1 gets three-fifths of it.

  1. ARs 36,000Correct
  2. BRs 24,000
  3. CRs 60,000
  4. DRs 90,000

Explanation

Net assets = 6,00,000 - 1,50,000 = 4,50,000. Consideration 5,10,000 gives a profit of Rs 60,000. M1's share at 3/5 = Rs 36,000. Rs 24,000 is M2's share, the wrong ratio part.

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