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Admission of a Partner Test - 42

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Admission of a Partner Test - 42
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  • Question 1
    1 / -0
    A and B are partners sharing the profit in the ratio $$3:2$$. They take C as the new partner, who is supposed to bring Rs. $$25,000$$ against capital and Rs. $$10,000$$ against goodwill. New profit sharing ratio is $$1:1:1$$. C is able to bring Rs. $$30,000$$ only. How this will be treated in the books of the firm?
    Solution
    When the new partner is not able to bring his share of goodwill in cash, his capital account is debited by the amount of his share of goodwill and such goodwill is credited to the old partners' capital accounts in sacrificing ratio.
  • Question 2
    1 / -0
    A and B are partners sharing the profit in the ratio of 3 : 2 they take C as the new partner, who brings in 25,000 against capital and 10,000 against goodwill. New profit sharing ratio is 1 : 1 : 1. In what ratio will this amount be shared among the old partners A and B?
    Solution
    At the time of admission of a new partner, When capital goodwill is bring by the new partner it is divided among the partners in their gaining and sacrificing ratio. It means gaining partner's capital A/c is credited and sacrificing partner's capital A/c is debited.
    Calculation of sacrificing ratio:
    Sacrificing Ratio =  Old Ratio - New Ratio
    A's sacrificing ratio = (3/5) - (1/3) = 4/15
    B's sacrificing ratio = (2/5) - (1/3) = 1/15
    Therefore, sacrificing ratio of A and B is 4 : 1 or 8 : 2 or 8000 : 2000
    Therefore, amount brought in by the new partner is divided among Sacrificing partner in sacrificing ratio i.e., 8000 : 2000 or 8 : 2 or 4 : 1
  • Question 3
    1 / -0
    A, B and C are partners sharing profits and losses in the ratio of $$3:2:1$$. C retires on a decided date and Goodwill of the firm is to be valued at Rs. $$1,20,000$$. Find the amount payable to retiring partner on account of goodwill? 
  • Question 4
    1 / -0
    R, J and D are the partners, sharing profits in the ration 7 : 5 : 4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three years purchase of last five years average profits. It the profits are 29,600; 28,700; 28,900; 24,000 and 26,800, what will be D's share of goodwill?
    Solution
    Calculation of goodwill
    1. Average profit = ( 29600 + 28700 + 28900 + 24000 + 26800 ) /5
                                = 138000 / 5
                                = 27600
    2. Goodwill = Average profit * No. of year's purchase
                        = 27600 * 3
                        =  82800
    D's share of profit = 4/16 or 1/4
    Therefore, D's share of goodwill = (82800 * 1) / 4
                                                           = 20700
  • Question 5
    1 / -0
    The following trading results are available in respect of the business carried on by a firm:
    2001                 Loss                    Rs.10,000
    2002                 Loss                    Rs.5,000
    2003                 Profit                  Rs.80,000
    2004                 Profit                  Rs.55,000
    The value of goodwill on the basis of 5 years' purchase of average profit of the business will be ___________.
    Solution
    Calculation of goodwill :
    1. Average profit = Total profit/ No. of years
       Average profit = Rs. (-10000 + [-5000] + 80000 + 55000 ) / 4 years
       Average profit = Rs. 120000 / 4 years
       Average profit = Rs. 30000
    2. Goodwill = Average profit * No. of year's purchase
        Goodwill =  Rs. 30000 * 5 years
        Goodwill =  Rs. 150000
  • Question 6
    1 / -0
    If, at the time of admission, some profit and loss account balance appears in the books, it will be transferred to _______________.
    Solution
    At the time of admission of a partner, any balance remaining in the profit and loss account is transferred to the old partners' capital accounts in the old profit sharing ratio.
  • Question 7
    1 / -0
    When a new partner brings his share of goodwill in cash, the amount is debited to:
    Solution
    When a new partner brings his share of goodwill in cash, the amount is debited to cash account and credited to premium for goodwill account. The journal entry is:
    Cash a/c       Dr.
            To Premium for Goodwill a/c
  • Question 8
    1 / -0
    X and Y share profits and losses in the ratio of 2: 1. They take Z as a partner and the new profit sharing ratio becomes 3 : 2: 1. Z brings Rs. 9,000 as a premium for goodwill.The full value of goodwill will be ________. 
    Solution
    Z is dmitted for 1/6th share of goodwill
    Z  brings Rs. 9000 as a premium of Goodwill is only 1/6th share of total goodwill
    Therefore, total goodwill of the firm is-
    Goodwill = Goodwill brought in by Z * Reciprocal of Z's share of profit
    Goodwill = Rs. 9000 * (6/1) = Rs. 54000
  • Question 9
    1 / -0
    On the admission of a partner if goodwill account is to be raised, this should be debited to_________. 
  • Question 10
    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 1/4th share. The amount of goodwill, which he is supposed to bring, will be:
    Solution
    Goodwill of the firm is valued at = Rs. 30,000
    Existing Goodwill                         = Rs. 12,000
    Goodwill to be brought in by C  = Rs. (30,000 - 12,000) x 1/4 = Rs. 4500
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