Stock at the time of dissolution was appearing in books at Rs 50,000. Half of the stock was sold at a discount of 20% and the remaining was taken over by one of the partners at a 10% discount. What amount was received in cash at the time of realization of stock.
Stock at the time of dissolution was appearing in books at Rs 50,000. Half of the stock was sold at a discount of 20% and the remaining was taken over by one of the partners at a 10% discount. What amount was received in cash at the time of realization of stock.
Solution
Book value of stock = Rs 50,000
Half of the stock = Rs 50,000 ÷ 2 = Rs 25,000
First half - Sold at 20% discount:
Sale value = Rs 25,000 - 20% of Rs 25,000
Sale value = Rs 25,000 - Rs 5,000 = Rs 20,000
This results in cash receipt of Rs 20,000
Second half - Taken over by partner at 10% discount:
Takeover value = Rs 25,000 - 10% of Rs 25,000
Takeover value = Rs 25,000 - Rs 2,500 = Rs 22,500
When a partner takes over an asset, it is adjusted against their capital account. No cash is received for this transaction.
Cash received at the time of realization = Only from the sold portion = Rs 20,000
The question specifically asks for amount received in cash, which excludes the asset taken over by the partner.
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