Admission of a Partner Test

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Admission of a Partner Test - 18

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Question 1
1 / -0

A, B and C are partners sharing profits in the ratio of 3 : 2 : 3, their capitals on 30th June, 2014 are A Rs. 10,000, B Rs. 5,000 and C Rs. 6,000 (Dr.). C becomes insolvent and loss due to his insolvency will be shared by A and B in _____________

A
equal ratio.

B
the ratio of 3 : 2.

C
the ratio of 2 : 1.

D
the ratio of 1 : 2.

Solution

Insolvency of partnership implies insolvency of one or more partners of firm (since partnership and partners are same from legal point of view). Loss arising out of insolvency of one or more partners shall be borne by remaining solvent partners in their capital ratio. Therefore, A & B will share the loss due to insolvency of C in the ratio 10,000:5,000 or 2:1.
Question 2
1 / -0

A and B are sharing profits and losses in the ratio of 4 :1. C is admitted as a new partner for 1/3rd share of profits for which he pays Rs. 30,000 as goodwill. If A and B agree to share future profits equally, then the amount of goodwill to be credited to A would be :

A
Rs. 30,000

B
Rs. 90,000

C
Rs. 48,000

D
Rs. 42,000

Solution

Total value of goodwill as per C's share = Rs.30000 * (3/1) = Rs.90000
Old ratio (A and B) = 4 : 1
New ratio (A, B and C) = 1 : 1 : 1
(Gaining) / Sacrificing ratio = Old ratio - New ratio
A's sacrifice = (4/5) - (1/3) = 7/15
B's sacrifice = (1/5) - (1/3) = -2/15 (Gain)
Therefore, amount of goodwill credited to A's account in sacrificing ratio
= Rs. 90000 * (7/15) = Rs. 42000
Question 3
1 / -0

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit Z as a partner with 1/4th share of profit. Z acquires his share from X and Y in the ratio of 2 : 1. Z's share of goodwill is calculated at Rs. 6000. Z is not in position to bring any amount for goodwill. What additional entry will be required if after Z's admission, it is decided that the goodwill account should not appear in the Balance Sheet of new firm ?

A
X's capital a/c Dr. 10,400

Y's capital a/c Dr. 7,600

Z's capital a/c Dr. 6,000

To Goodwill a/c 24,000

B
Goodwill a/c Dr. 24,000

To X's capital a/c 10,400

To Y's capital a/c 7,600

To Z's capital a/c 6,000

C
X's capital a/c Dr. 10,400

Y's capital a/c Dr. 7,600

To Z's capital a/c 18,000

D
None of the above

Solution
Question 4
1 / -0

Which of the following may be utilized by a limited company for the redemption of redeemable preference shares?

A
General Reserve

B
Dividend Equalisation Fund

C
Profit and Loss account balance

D
Workmen Compensation Fund

E
All of these
Solution
The redempton of preference shares is subject to the following restrictions :
Fully paid - Such shares can be redeem only if these are fully paid.
Two sources of redeeming such shares - Such shares can be redeem only out of the following two surces:
(a) Divisible profits, i.e., profits available for distribution as dividend. Some examples of divisible profit are as under -
General reseerve
Reserve fund
Dividend equalisation fund
Insurance fund
Workmen compensation fund
Workmen accident fund
Profit and loss account
(b) Proceeds of fresh issue of shares made for the pourpose of redeption.
Question 5
1 / -0

Goodwill is regarded as an___________ asset.

A
intangible

B
tangible

C
fixed

D
capital

Solution

A well-established business develops an advantage of good name, reputation and wide business connections. In accounting, the monetary value of such advantage is known as "goodwill". It is regarded as an intangible asset. In other words, goodwill is the value of the reputation of a firm in respect of the profits expected in future over and above the normal profits.
Question 6
1 / -0

The capitalised value attached to the differential profit capacity of a business is called _________.

A
asset

B
goodwill

C
trademark

D
copyright

Solution

Goodwill is an intangible asset. Goodwill is "the capitalised value attached to the differential profit capacity of a business". It exists only when the firm earns super profits. Any firm that earns normal profits or is incurring losses has no goodwill.
Question 7
1 / -0

According to the provisions of _____________ unless it is otherwise provided in the partnership deed a new partner can be admitted only when the existing partners unanimously agree for it.

A
Negotiable Instruments Act, 1881

B
Indian Contract Act, 1872

C
Sale of Goods Act, 1930

D
Partnership Act, 1932

Solution

When the firm needs additional capital or managerial help, a new partner may be admitted. According to the provisions of Partnership Act, 1932 unless it is otherwise provided in the partnership deed, a new partner can be admitted only when the existing partners unanimously agree for it. For example, Hari and Haqque are partners sharing profits in the ratio of 3:2. On April 1, 2007 they admitted Soham as a new partner with 1/6th share in profits of the firm. With this change there are three partners of the firm and it stands reconstituted.
Question 8
1 / -0

A partner may retire with the consent of:

A
Two partners

B
Ten partners

C
Majority of the partners

D
None of the above

Solution

Retirement of a partner:
A partner may retire-
a.       with the consent of all the other partners,
b.       in accordance with an express agreement by the partners, or
c.       where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.
Question 9
1 / -0

Partnership may also stand reconstituted on _________ of a partner, if the remaining partners decide to continue the business of the firm as usual.

A
retirement

B
death

C
admission

D
both a and c

Solution

Death of a partner is one of the mode of reconstitution of partnership firm. Partnership may also stand reconstituted on death of a partner, if the remaining partners decide to continue the business of the firm as usual. For example, X, Y and Z are partners in a firm sharing profits in the ratio 3:2:1. X died on March 31, 2007. Y and Z decide to carry on the business sharing profits equally. The continuity of business by Y and Z sharing future profits equally leads to reconstitution of the firm.
Question 10
1 / -0

Ram, Mohan and Sohan are partners in a firm sharing profits in the ratio 3:2:1. With effect from April 1, 2007 they decided to share profits equally as Sohan brings in additional capital.
This is an example of ______________.

A
Retirement of an existing partner

B
Death of a partner

C
Change in the profit sharing ratio among the existing partner

D
Admission of a new partner

Solution

Change in the profit sharing ratio among the partners is one of the mode of reconstitution of partnership firm. Sometimes the partners of a firm may decide to change their existing profit sharing ratio. For example, Ram, Mohan and Sohan are partners in a firm sharing profits in the ratio of 3:2:1. With effect from April 1, 2007, they decided to share profits equally as Sohan brings in additional capital. This results in change in the existing agreement leading to reconstitution of the firm.

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Admission of a Partner Test - 18

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Admission of a Partner Test - 18

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Question 1

equal ratio.

the ratio of 3 : 2.

the ratio of 2 : 1.

the ratio of 1 : 2.

Solution

Question 2

Rs. 30,000

Rs. 90,000

Rs. 48,000

Rs. 42,000

Solution

Question 3

X's capital a/c Dr. 10,400Y's capital a/c Dr. 7,600Z's capital a/c Dr. 6,000 To Goodwill a/c 24,000

Goodwill a/c Dr. 24,000To X's capital a/c 10,400To Y's capital a/c 7,600To Z's capital a/c 6,000

X's capital a/c Dr. 10,400Y's capital a/c Dr. 7,600 To Z's capital a/c 18,000

None of the above

Solution

Question 4

General Reserve

Dividend Equalisation Fund

Profit and Loss account balance

Workmen Compensation Fund

All of these

Solution

Question 5

intangible

tangible

fixed

capital

Solution

Question 6

asset

goodwill

trademark

copyright

Solution

Question 7

Negotiable Instruments Act, 1881

Indian Contract Act, 1872

Sale of Goods Act, 1930

Partnership Act, 1932

Solution

Question 8

Two partners

Ten partners

Majority of the partners

None of the above

Solution

Question 9

retirement

death

admission

both a and c

Solution

Question 10

Retirement of an existing partner

Death of a partner

Change in the profit sharing ratio among the existing partner

Admission of a new partner

Solution

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X's capital a/c Dr. 10,400

Y's capital a/c Dr. 7,600

Z's capital a/c Dr. 6,000

To Goodwill a/c 24,000

Goodwill a/c Dr. 24,000

To X's capital a/c 10,400

To Y's capital a/c 7,600

To Z's capital a/c 6,000

X's capital a/c Dr. 10,400

Y's capital a/c Dr. 7,600

To Z's capital a/c 18,000