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CMA Intermediate · Financial Accounting · Amalgamation of Partnership Firms

X and Y share profits 3:2 in a firm that is to amalgamate. On revaluation, stock of ₹80,000 is valued at ₹70,000, furniture of ₹50,000 is valued at ₹56,000, a provision for doubtful debts of ₹4,000 is created, and an unrecorded liability of ₹2,000 is found. X's share of the revaluation result is:

The net revaluation loss is ₹10,000, being stock down ₹10,000, furniture up ₹6,000, provision ₹4,000 and unrecorded liability ₹2,000. X bears 3/5 of it, so X's share is a loss of ₹6,000.

  1. ALoss of ₹6,000Correct
  2. BLoss of ₹4,800
  3. CLoss of ₹4,000
  4. DLoss of ₹5,000

Explanation

Net result = -10,000 + 6,000 - 4,000 - 2,000 = loss of ₹10,000. X bears 3/5 of ₹10,000 = ₹6,000. Omitting the unrecorded liability gives a loss of ₹8,000 and X's share of ₹4,800, which is wrong. ₹4,000 is Y's share.

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