Comprehension Passage
Radha, Sheela, and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2019, Sheela retires from the firm. On that date, their Balance Sheet was as follows:
Balance Sheet as on April 1, 2019
| Liabilities | Amount (Rs.) |
|---|---|
| Trade Creditors | 3,000 |
| Bills Payable | 4,500 |
| Expenses Owing | 4,500 |
| General Reserve | 13,500 |
| Capitals: | |
| Radha | 15,000 |
| Sheela | 15,000 |
| Meena | 15,000 |
| Total | 70,500 |
| Assets | Amount (Rs.) |
|---|---|
| Cash-in-Hand | 1,500 |
| Cash at Bank | 7,500 |
| Debtors | 15,000 |
| Stock | 12,000 |
| Factory Premises | 22,500 |
| Machinery | 8,000 |
| Loose Tools | 4,000 |
| Total | 70,500 |
The terms were:
(a) Goodwill of the firm was valued at Rs. 13,500.
(b) Expenses owing to be brought down to Rs. 3,750.
(c) Machinery and Loose Tools to be valued at 10% less than their book value.
(d) Factory premises are to be revalued at Rs. 24,300.
After the revaluation of the factory premises at Rs. 24,300, which of the following reflects the treatment of the factory premises in the firm’s books?
1
The value of the factory premises is adjusted against the partners’ capital accounts
2
The increased value of the factory premises is credited to a revaluation reserve account
3
The factory premises are sold and the amount credited to cash at bank
4
The factory premises are written off as an expense