Question : Half of the Trade Creditors valued Rs 40,000 accepted Plant and Machinery at 10% less than the book value and Cash of Rs. 5,000 in full settlement of their claims. The remaining Trade Creditors were paid at a discount of 10%. The entry will be
Option 1: Realization account debited and Bank account credited by Rs 5,000
Option 2: Realization account debited and Bank account credited by Rs 36,000
Option 3: Realization account debited and Bank account credited by Rs 41,000
Option 4: Realization account debited and Bank account credited by Rs 80,000
Correct Answer: Realization account debited and Bank account credited by Rs 41,000
Solution :
Answer =
Realization account debited and Bank account credited by Rs 41,000
Total value of creditors= 80,000(40,000×2)
Paid cash= 5,000
Paid to creditor= 40,000- 4,000(40,000×10%)= 36,000.
Total payment = 41,000.
Realisation A/C Dr 41,000
To Bank A/C 41,000.
Hence, the correct option is 3.
