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Admission of a Partner Test - 46

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Admission of a Partner Test - 46
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  • Question 1
    1 / -0
    Under average profit basis goodwill is calculated by :
  • Question 2
    1 / -0
    Which of the following asset is compulsory to revalue at the time of admission of a new partner?
  • Question 3
    1 / -0
    Under annuity basis goodwill is calculated by _________________.
  • Question 4
    1 / -0
    In which of the following case the need for the valuation of goodwill in a firm may arise?
    Solution
    There are various circumstances when it may be necessary to value goodwill. Some of the circumstances are:
    (1) In the case of a partnership, when there is an admission, retirement, death or amalgamation, or a change in the profit sharing ratio take place, valuation of goodwill becomes necessary.
    (2) In the case of a company, when two or more companies amalgamate, or one company absorbs another company, or one company wants to acquire controlling interest in another company or when the Government takes over the business, valuation of goodwill becomes necessary.
    (3) In the case of a sole trader concern, goodwill is valued at the time of selling die business, to decide the purchase consideration.
    (4) In the case of individuals, goodwill is valued for purpose of Estate Duty, Death Duty, etc. On the death of a person.
    Therefore, D is the correct option.

  • Question 5
    1 / -0
    The correct entry for recording losses on revaluation would be:
    Solution

  • Question 6
    1 / -0
    Sometimes, all the partners including the new partner may agree no to alter the book value of assets and liablities even when they agree to revalue them. In order to record this, ______ is opened.
  • Question 7
    1 / -0
    A & B are partner for $$5:3$$. The take C and new profit sharing ratio will be $$3:2:1$$. Profit of loss in revaluation is shared by __________.
  • Question 8
    1 / -0
    Find the goodwill from the following information:
    Capital employed - Rs.$$11,00,000$$
    Rate of normal return - Rs.$$10\%$$
    Future Maintainable profit - Rs.$$2,00,000$$
    No. of year purchase -$$3$$ years
  • Question 9
    1 / -0
    A & B are partners sharing profits & losses in the ratio of $$3:2$$. C was admitted to the firm and to introduce a capital of Rs.$$25,000$$. The new profit sharing ratio of A,B and C will be $$3:2:1$$ respectively. C is unable to fring in cash for his share of goodwill, partners therefore, decide to raise goodwill account in the books of the firm. They further decide to calculate goodwill on the basis of C's share in the profits and the capital contribution made by him to the firm. Before admission of C capital account balance of A & B was Rs.$$44,000$$ & Rs.$$36,000$$ respectively. Total goodwill to be raised in the books of the firm will be __________.
    Solution
    Total capital of the firm according to C = Rs. 25000 x 6
                                                                     = Rs. 150000
    Actual total capital of the firm= Rs. 44000 + 36000 + 25000
                                                     = Rs. 105000
    Value of hidden goodwill = Rs. 150000 - 105000
                                               = Rs. 45000
    Therefore, D is the correct option.
  • Question 10
    1 / -0
    The following particulars are available in respect of the business carried on by a partnership firm:
    Trading Results:
    $$2011$$ Loss Rs. $$5,000$$
    $$2012$$ Loss Rs. $$10,000$$
    $$2013$$ Profit Rs. $$75,000$$
    $$2014$$ Profit Rs. $$60,000$$
    You are required to compute the value of goodwill on the basis of $$5$$ years purchase of average profit.
    Solution
    Calculation of goodwill :
    1.  Average profit = Total profit/ No. of years
        Average profit = Rs. [-5000 + (-10000) + (75000) + (60000)]/ 4
        Average profit =  Rs. 120000/ 4
        Average profit =  Rs. 30000
    2. Goodwill = Average profit * No. of years purchase
        Goodwill = Rs. 30000 * 5 years
        Goodwill = Rs. 150000
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