Question

Sujata and Laxmi were partners in a firm sharing profits and losses in the ratio of 2 : 1. On 1st April, 2025, they admitted Raghu as a new partner for 1/5th share in the profits of the firm. On the date of Raghu’s admission, it was found that the equipment is undervalued by ₹ 90,000. After revaluation, the Balance Sheet of Sujata, Laxmi and Raghu showed equipment at ₹ 3,00,000. The value of equipment shown in the books of the firm of Sujata and Laxmi before Raghu’s admission was :

• A. ₹ 3,90,000
• B. ₹ 2,10,000
• C. ₹ 3,00,000
• D. ₹ 90,000

Hint:

When an asset is undervalued: Revalued Value = Book Value + Amount of Undervaluation
When an asset is overvalued: Revalued Value = Book Value - Amount of Overvaluation
In partnership admission, revaluation account is prepared to adjust the values of assets and liabilities to their current market values.

Answer 1

The Correct Option is B

We are given that equipment was undervalued by ₹ 90,000 at the time of Raghu's admission. After revaluation, the equipment is shown at ₹ 3,00,000 in the new balance sheet. We need to find the book value before revaluation.
Step 1: Understand the meaning of "undervalued by ₹ 90,000."
If an asset is undervalued, it means its book value is less than its actual/revalued value. The difference of ₹ 90,000 is the amount of undervaluation.
Step 2: Set up the relationship.
Let the book value before revaluation = \( x \)
Undervaluation = ₹ 90,000
Revalued value = Book value + Undervaluation Given that after revaluation, the equipment is shown at ₹ 3,00,000: \[ x + 90,000 = 3,00,000 \] Step 3: Solve for \( x \).
\[ x = 3,00,000 - 90,000 \] \[ x = 2,10,000 \] Step 4: Verify.
Book value before admission = ₹ 2,10,000
Undervaluation = ₹ 90,000
Revalued value = ₹ 2,10,000 + ₹ 90,000 = ₹ 3,00,000 ✓ Final Answer: (B) ₹ 2,10,000