Question

At the time of dissolution of a partnership firm, the stock appeared in the books was Rs 35,000. One of the partner took over 50% of the stock at 10% less than its book value, and the remaining stock was sold at a gain of 15%. Find the total amount realized from the stock in cash.

• A. Rs 15,750
• B. Rs 17,500
• C. Rs 20,125
• D. Rs 35,875

Hint:

Stock taken over by a partner is not cash. Cash comes only from the half sold at 115% of its book value.

Answer 1

The Correct Option is C

Step 1: Plan:
Treat the stock as two equal halves. One half goes to a partner as a non-cash transfer. The other half is sold for cash. Only the sold half gives cash.

Step 2: Sold half:
The sold half is 0.5 x 35,000 = 17,500 at book value. A 15% gain means the price is 1.15 times book value.

Step 3: Calculate the cash:
Cash = 1.15 x 17,500 = 17,500 + 2,625 = Rs 20,125.

Step 4: The partner's half:
His half is valued at 0.90 x 17,500 = Rs 15,750. This amount is only adjusted in his capital account. No cash is received. So it is left out.

Step 5: Compare with the options:
Adding both values gives Rs 35,875. That is the total value realised, but not the cash. The question asks for cash, so only Rs 20,125 is correct.

Final Answer:
Cash realised is Rs 20,125. \[\boxed{20125}\]