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CMA Intermediate · Financial Accounting · Retirement of Partner

Mehta, Nair and Oberoi share profits 3:2:1. Oberoi retires. Stock of Rs 80,000 is revalued at Rs 70,000, furniture of Rs 40,000 is appreciated by 20%, and a creditor of Rs 5,000 is found not payable. What is the profit or loss on revaluation, and what is Oberoi's share of it?

Net revaluation profit is Rs 3,000, being gains of Rs 8,000 on furniture and Rs 5,000 on the liability, less Rs 10,000 stock loss. Oberoi's share at 1/6 under the old 3:2:1 ratio is Rs 500.

  1. AProfit Rs 3,000; Oberoi's share Rs 500Correct
  2. BProfit Rs 3,000; Oberoi's share Rs 1,000
  3. CProfit Rs 3,000; Oberoi's share Rs 1,500
  4. DLoss Rs 3,000; Oberoi's share Rs 500

Explanation

Stock loss 10,000; furniture gain 8,000 (20% of 40,000); liability decrease gain 5,000. Net = 13,000 - 10,000 = 3,000 profit. Oberoi's share is 1/6 of 3,000 = 500. Using 1/3 or 1/2 is wrong because the old ratio 3:2:1 gives Oberoi 1/6.

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