Question

On the date of admission of a partner, there was a balance of ₹45,000 in the account of machinery. It was found undervalued by 10%. The value of machinery will appear in the new Balance Sheet at

• A. ₹49,500
• B. ₹40,500
• C. ₹40,000
• D. ₹50,000

Answer 1

The Correct Option is D

To accurately reflect the machinery's value on the new Balance Sheet, an adjustment is required due to a 10% undervaluation. The procedure is as follows:

1. Current machinery valuation: ₹45,000.

2. Undervaluation percentage: 10%.

3. Calculation of the correct machinery valuation.

As the machinery was undervalued by 10%, the current value of ₹45,000 represents 90% of its actual worth. The true value (100%) is determined using the following calculation:

Calculation:

\(\text{Actual Value} = \frac{\text{Current Value}}{0.9} = \frac{45000}{0.9} = 50000\)

4. Consequently, the machinery will be recorded at ₹50,000 on the new Balance Sheet.

The correct valuation is therefore ₹50,000.