Admission of a Partner Test

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Admission of a Partner Test - 40

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Weekly Quiz Competition

Question 1
1 / -0

X and Y are partners sharing profit in the ratio of 1: 1. They admit Z for 1/5th share who contributed 25,000 for his share of goodwill. The total value of the goodwill of the firm will be:

A
25,000

B
50,000

C
1,00,000

D
1,25,000

Solution

Z is admitted for 1/5th share. He is bringing Rs. 25000 for his share of goodwill.
Value of goodwill of the firm = 25000 x 5/1
= Rs. 125000
Therefore, D is the correct option.
Question 2
1 / -0

A and B were partners in a joint venture sharing profits and losses in the ratio of 4:1. A supplies goods to the value ofRs. 55,000 and incurs expenses amounting to Rs. 400. B supplies goods to the value of Rs. 14,000 and his expenses amount to Rs. 300. B sells goods on behalf of the joint venture and realizes Rs. 92,000. B is entitled to a commission of 5 per cent on sales. B settles his account by bank draft. What will be the final remittance ?

A
B will remit Rs. 69,560 to A

B
A will remit Rs. 69,560 to B

C
A will remit Rs. 69,000 to B

D
B will remit Rs. 69,000 to A
Question 3
1 / -0

A and B were partners in a joint venture Sharing profits and losses in the ratio of 3:2. A supplies goods to the value of Rs. 65,000 and incurs expenses amounting Rs. 1,000. B supplies goods to the value of Rs. 18,000 and his expenses amount to Rs. 1,000. B Sells goods on behalf of the joint venture and realizes Rs. 1,20,000. B entitled to commission of 5% on sales. B settles his account by bank draft. How much amount, B will pay to A as final settlement ?

A
Rs. 83,400

B
Rs. 93,200

C
Rs. 80,000

D
None of these
Question 4
1 / -0

A and B are partners in a business sharing profits in the ratio of 5 : 3. They admit C as a partner with 1/4 share in the profits which he acquires 3/4 from A and 1/4 from B. He pays 4,000 as his share of Goodwill A and B will be credited by:

A
2,500 and 1,500 respectively

B
2,000 each

C
1,000 and 3,000 respectively

D
3,000 and 1,000 respectively

Solution
Question 5
1 / -0

Goodwill is a/an __________.

A
contingent asset

B
tangible asset

C
intangible asset

D
current asset

Solution

Goodwill is an intangible asset that arises when one company purchases another for a premium value. Any excess of the amount of purchase consideration over the value of net assets of the transferor company acquired by the transferee company should be recognised as goodwill in the financial statements of transferee company.
Goodwill is considered as intangible asset because it is not a physical asset like building or equipment.
Question 6
1 / -0

Goodwill of a firm of A and B is valued at 30,000. It is appearing in the books at 12,000. C is admitted for 1/4 share. What amount he is supposed to bring for goodwill?

A
3,000

B
4,500

C
7,500

D
10,500
Question 7
1 / -0

R admitted as a new partner for one-fourth share of future profits, fails to bring in cash of 5,000 towards goodwill but the existing (old) partners S and T, sharing profits in the ratio of 3 : 2, raise the goodwill account at its full value. Therefore the partners will be credited for goodwill as:

A
S - 3000, T - 2000, R - Nil

B
S - 9000, T - 6000, R - 5000

C
S - 12000, T - 8000, R - Nil

D
S - 2250, T - 1500, R - 1250
Question 8
1 / -0

A, B and C are the partners in a business firm sharing their profits in the ratio of 4 : 3 : 2. A new partner D enters the firm. The new profit sharing of A, B, C and D is 5 : 4 : 2: 1. D contributes a goodwill of $$Rs.36,000$$. This goodwill is to be allocated among A, B and C. Which one of the following will be the correct allocation?

A
A - $$Rs.16,000$$, B - $$Rs.12,000$$, C - $$Rs.8,000$$

B
A - $$Rs.12,000$$, B - $$Rs.8,000$$, C - $$Rs.16,000$$

C
A - $$Rs.12,000$$, B - Nil, C - $$Rs.24,000$$

D
A - $$Rs.24,000$$, B - Nil, C - $$Rs.12,000$$

Solution

At the time of admission of a new partner, existing partners suffer a loss in terms of share of profit and due to this reason incoming partner has to bring amount of capital and goodwill to compensate sacrificing partners in their sacrificing ratio.
Calculation of sacrificing ratio of old partners for the given question :
Sacrificing ratio = Old ratio - New ratio
A's sacrifice = (4/9) - (5/12) = 1/36
B's sacrifice = (3/9) - (4/12) = 0
C's sacrifice = (2/9) - (2/12) = 2/36
Allocation of goodwill among sacrificing partner (A and C) will be in ratio of 1:2
A's share of goodwill = Rs. 36000 * (1/3) = Rs. 12000
B's share of goodwill = Rs. 36000 * (2/3) = Rs. 24000
Question 9
1 / -0

Goodwill brought in by incoming partner in cash is taken away by the old partners in ___________.

A
Old Profit Sharing Ratio

B
New Profit Sharing Ratio

C
Sacrificing Ratio

D
Capital Ratio

Solution

In case of admission of a partner, goodwill cannot be raised in the books of the firm because ni consideration in money or money;s worth is paid for it. If incoming partner brings any premium over and above his capital contribution at the time of his admission, such premium should be distributed to other existing partners. When a new partner is admitted to a firm, the old partner generally sacrifice in favour of the new partner in terms of lower profit sharing ratio in the future. Therefore, the premium for goodwill brought in by the new partner shall be given to the existing partners on the basis of profit sacrificing ratio.
Question 10
1 / -0

Weighted average method of calculating goodwill is used when __________.

A
Profits are not equal

B
Profits has increasing trend

C
Profits has decreasing trend

D
Either b or c

Solution

In average method of calculating goodwill , profits of past few years are averaged and adjusted for any expected change in future. For averaging the past profit, either simple average or weighted average may be employed depending upon the circumstances. If there exist a clear increasing or decreasing trend of profits, it is better to give more weight to the profits of recent years than those of earlier years. But, if there is no trend of profit, it is better to go by simple average.

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Re-Attempt Weekly Quiz Competition

Admission of a Partner Test - 40

Result

Admission of a Partner Test - 40

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SHARING IS CARING

Question 1

25,000

50,000

1,00,000

1,25,000

Solution

Question 2

B will remit Rs. 69,560 to A

A will remit Rs. 69,560 to B

A will remit Rs. 69,000 to B

B will remit Rs. 69,000 to A

Question 3

Rs. 83,400

Rs. 93,200

Rs. 80,000

None of these

Question 4

2,500 and 1,500 respectively

2,000 each

1,000 and 3,000 respectively

3,000 and 1,000 respectively

Solution

Question 5

contingent asset

tangible asset

intangible asset

current asset

Solution

Question 6

3,000

4,500

7,500

10,500

Question 7

S - 3000, T - 2000, R - Nil

S - 9000, T - 6000, R - 5000

S - 12000, T - 8000, R - Nil

S - 2250, T - 1500, R - 1250

Question 8

A - $$Rs.16,000$$, B - $$Rs.12,000$$, C - $$Rs.8,000$$

A - $$Rs.12,000$$, B - $$Rs.8,000$$, C - $$Rs.16,000$$

A - $$Rs.12,000$$, B - Nil, C - $$Rs.24,000$$

A - $$Rs.24,000$$, B - Nil, C - $$Rs.12,000$$

Solution

Question 9

Old Profit Sharing Ratio

New Profit Sharing Ratio

Sacrificing Ratio

Capital Ratio

Solution

Question 10

Profits are not equal

Profits has increasing trend

Profits has decreasing trend

Either b or c

Solution

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