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CMA Intermediate · Financial Accounting · Amalgamation of Partnership Firms

P, Q and R share profits 3:2:1, and P's capital is ₹1,20,000. On revaluation before amalgamation: the provision for doubtful debts rises from ₹5,000 to 8% of debtors of ₹1,00,000; stock is overvalued by ₹12,000; creditors of ₹40,000 are settled at ₹38,000; and an unrecorded investment worth ₹7,000 is found. P's capital after revaluation is:

The net revaluation loss is ₹6,000: an extra provision of ₹3,000 and stock loss of ₹12,000, offset by a ₹2,000 creditor gain and a ₹7,000 investment. P bears half, ₹3,000, so P's capital falls from ₹1,20,000 to ₹1,17,000.

  1. A₹1,17,000Correct
  2. B₹1,14,500
  3. C₹1,13,500
  4. D₹1,15,000

Explanation

Provision increase = 8,000 - 5,000 = 3,000 loss. Net = -3,000 - 12,000 + 2,000 + 7,000 = loss of ₹6,000. P bears 3/6 = ₹3,000, so capital = ₹1,17,000. Charging the full ₹8,000 provision gives ₹1,14,500; omitting the investment gives ₹1,13,500.

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