Admission of a Partner Test

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Admission of a Partner Test - 17

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Weekly Quiz Competition

Question 1
1 / -0

A & B are partners and their PSR is 3 : 2 , they admitted C for 1/5 share than new ratio will be ?

A
12:8:5

B
5:8:12

C
5:3:2

D
3:2:3

Solution

Old ratio of A and B are 3/5 and 2/3 respectively.
C share 1/5
step 1 :
remaining share = 1 - new partner share = 1-1/5= 4/5
new ratio = old ratio x rem share
A new share = 3/5 x 4/5 = 12/5
B new share = 2/5 x 4/5 = 8/5
c new share (equalize) = 1/5 x 5/5 = 5.
Question 2
1 / -0

Incoming partner agree that, _______ account be raised in the books of the firm by giving the necessary credit to the old partners for their sacrifice.

A
Goodwill

B
Cash

C
Capital

D
None of above

Solution

Incoming partner acquires his share of profit in partnership firm only because of the sacrifice of old partners in a there existing share of profits. Hence, to compensate the sacrificing partners, a goodwill account is raised and credited to such partners' capital.
Question 3
1 / -0

Ram and Shyam are Partners in 1:1, Rohit got admitted and New Ratio agreed for 5:3:2. Then calculate Sacrifice Ratio.

A
1:1

B
2:1

C
Only Shyam made sacrifice for 1/5 th Share

D
None

Solution

Sacrifice Ratio $$ =$$ Old ratio - New Ratio.
Ram Sacrifice $$ = 1/2 - 5/10 = $$ Nil
Shyam Sacrifice $$= 1/2 - 3/10 = 4/20 = 1/5$$
Here Ram has made no sacrifice in share of Profit but Shyam has sacrificed his share for 1/5.
Question 4
1 / -0

When the business is sold to a company, the purchase consideration received is transferred to _________.

A
Assets account

B
Capital accounts of the partner's

C
Bank account

D
Realisation account

Solution

Purchase consideration is the value on which the business is sold to another company. Purchase consideration can be paid through issue of shares or in cash.
In such case, all assets and liabilities are transferred to a separate account which is called "Realization A/c". Amount of purchase consideration shall also be transferred to realization a/c.
Question 5
1 / -0

On the admission of a new partner, the decrease in the value of assets is debited to:

A
Asset Account

B
Profit & Loss Adjustment Account

C
Old Partner's Capital Account

D
None of the above

Solution

A Memorandum Profit and Loss Adjustment Account will be opened in the books. The increase in the value of assets or decrease in the value of liabilities will be credited to this account.
Question 6
1 / -0

Sacrificing ratio is used at the time of _____________ .

A
Admission of a partner

B
Retirement of a partner

C
Death of a partner

D
Dissolution of firm

Solution

When a partner is 'admitted' only then sacrificing ratio is used.
Sacrificing ratio is calculated only for the existing partners to check the proportion in which they would sacrifice their share for the new partner.
Note: An incoming partner can acquire the share either by purchasing it from the exiting partner/s or by contributing to the assets of the firm.
Question 7
1 / -0

A and B are partners in the ratio of 2 : 1. They admit C for 1/4 share who contributes Rs. 30,000 for his share of goodwill. The total value of the goodwill of the firm is _________.

A
$$Rs. 30,000$$

B
$$Rs. 90,000$$

C
$$Rs. 1,20,000$$

D
$$Rs. 1,50,000$$

Solution

Old ratio (A and B) = 2 : 1
C is admitted for 1/4th share of profit
For 1/4 share C bring Rs. 30000 for goodwill
Therefore, goodwill of the firm = C's share of goodwill * Reciprocal of C's profit share
Total goodwill = Rs. 30000 * (4/1) = Rs. 120000
Question 8
1 / -0

A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. Their capitals on 30th June, 2014 are A - Rs. 10,000, B - Rs. 6,000 and C - Rs. 2.000. The current account balances are, A- Rs. 8,000 (Cr.), B - Rs. 3,000 (Cr.) and C - Rs. 9,000 (Dr.). Loss arising from the insolvency of C will be shared by A and B in:

A
equal ratio

B
the ratio of 4:3

C
the ratio of 5 : 3

D
the ratio of 2 :1

Solution

According to the Garner Vs Murray rule, the loss arising on insolvency of a partner is a capital loss which should be borne by the solvent partners in their capital ratio. Once a partner is insolvent, the loss arising from him to be borne by the other partners in their capital ratio. Here, the loss on insolvency of C will be shared by A & B in the ratio of their fixed capitals, i.e, 10,000 : 6,000 or 5 : 3.
Question 9
1 / -0

The reconstitution of a partnership firm may take place in the following way:

A
By introduction of a partner

B
By retirement of a partner

C
By insolvency of a partner

D
All the above

Solution

Reconstitution of partnership means any change/ modification in the existing agreement/ structure of partnership. It can mean admission of partner/s or exiting/reducing the number of partner/s.
This change may bring about the change in the profit sharing ratio amongst the partners.
Question 10
1 / -0

A and B are partners sharing profit and losses equally with capitals of Rs.7000 each. They admit C as a partner with 1/4th share in the profits of the firm. C brings Rs.8000 as his share of capital. The necessary journal entry to record goodwill be ___________________.

A
As capital a/c Dr. 5,000
Bs capital a/c Dr. 5,000
To Goodwill a/c 10,000

B
Goodwill a/c Dr. 10,000
To As capital a/c 5,000
To Bs capital a/c 5,000

C
C's capital a/c Dr. 10,000
To As capital a/c 5,000
To Bs capital a/c 5,000

D
C's capital a/c Dr. 2,500
To A's capital a/c 1,250
To B's capital a/c 1,250

Solution

C brings in capital = Rs. 8,000 for 1/4th share in profits and losses.
Total value of the new firm = 8,000 x 4/1 = Rs. 32,000

Existing capital of the new firm = Rs. 7,000 + 7,000 + 8,000 = Rs. 22,000

Goodwill = Rs. 32,000 - 22,000 = Rs. 10,000
C's share of goodwill = Rs. 10,000 x 1/4 = Rs. 2,500
which will be divided among A & B equally.

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Admission of a Partner Test - 17

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Admission of a Partner Test - 17

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SHARING IS CARING

Question 1

12:8:5

5:8:12

5:3:2

3:2:3

Solution

Question 2

Goodwill

Cash

Capital

None of above

Solution

Question 3

1:1

2:1

Only Shyam made sacrifice for 1/5 th Share

None

Solution

Question 4

Assets account

Capital accounts of the partner's

Bank account

Realisation account

Solution

Question 5

Asset Account

Profit & Loss Adjustment Account

Old Partner's Capital Account

None of the above

Solution

Question 6

Admission of a partner

Retirement of a partner

Death of a partner

Dissolution of firm

Solution

Question 7

$$Rs. 30,000$$

$$Rs. 90,000$$

$$Rs. 1,20,000$$

$$Rs. 1,50,000$$

Solution

Question 8

equal ratio

the ratio of 4:3

the ratio of 5 : 3

the ratio of 2 :1

Solution

Question 9

By introduction of a partner

By retirement of a partner

By insolvency of a partner

All the above

Solution

Question 10

As capital a/c Dr. 5,000Bs capital a/c Dr. 5,000 To Goodwill a/c 10,000

Goodwill a/c Dr. 10,000 To As capital a/c 5,000 To Bs capital a/c 5,000

C's capital a/c Dr. 10,000 To As capital a/c 5,000 To Bs capital a/c 5,000

C's capital a/c Dr. 2,500 To A's capital a/c 1,250 To B's capital a/c 1,250

Solution

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As capital a/c Dr. 5,000
Bs capital a/c Dr. 5,000
To Goodwill a/c 10,000

Goodwill a/c Dr. 10,000
To As capital a/c 5,000
To Bs capital a/c 5,000

C's capital a/c Dr. 10,000
To As capital a/c 5,000
To Bs capital a/c 5,000

C's capital a/c Dr. 2,500
To A's capital a/c 1,250
To B's capital a/c 1,250