Aryaman and Bholu are partners sharing profit and losses in ratio of 5:3. Chirag is admitted for 1/4th share. On the date of reconstitution, the debtors stood at Rs 40,000, bill receivable stood at Rs. 10,000 and the provision for doubtful debts appeared at Rs. 4000. A bill receivable, of Rs 10,000 which was discounted from the bank, earlier has been reported to be dishonored. The firm has sold, the debtor so arising to a debt collection agency at a loss of 40%. If bad debts now have arisen for Rs 6,000 and firm decides to maintain provisions at same rate as before then amount of Provision to be debited to Revaluation Account would be:
A. Rs 4,400
B. Rs 4,000
C. Rs.3,400
D. None of the above
Answer:C
Aryaman and Bholu are partners sharing profit and losses in ratio of 5:3. Chirag is admitted for 1/4th share. On the date of reconstitution, the debtors stood at Rs 40,000, bill receivable stood at Rs. 10,000 and the provision for doubtful debts appeared at Rs. 4000. A bill receivable, of Rs 10,000 which was discounted from the bank, earlier has been reported to be dishonored. The firm has sold, the debtor so arising to a debt collection agency at a loss of 40%. If bad debts now have arisen for Rs 6,000 and firm decides to maintain provisions at same rate as before then amount of Provision to be debited to Revaluation Account would be:
A. Rs 4,400 B. Rs 4,000 C. Rs.3,400 D. None of the above