Admission of a Partner Test

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Admission of a Partner Test - 47

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Weekly Quiz Competition

Question 1
1 / -0

When required amount for premium for goodwill is not brought in by new partner, goodwill account is raised in the books of the firm by debiting goodwill account and crediting partners capital account in

A
New profit sharing ratio

B
Old profit sharing ratio

C
Scarifying ratio

D
Capital ratio
Question 2
1 / -0

X & Y sharing profits in the ratio of $$3:1$$. They admit Z as a partner who pays $$Rs.4,000$$ as goodwill the new profit sharing being $$2:1:1$$ among X,Y & Z respectively. The amount of goodwill will be credited to ___________.

A
X & Y as $$Rs.3,000$$ & $$Rs.1,000$$ respectively

B
X only

C
Y only

D
None of the above

Solution

At the time of admission of a new partner, goodwill bought in by new partner is distributed among sacrificing partners in their sacrificing ratio.
In the given question -
Old ratio (X and Y) = 3 : 1
New ratio (X, Y and Z) = 2 : 1 : 1
Sacrificing ratio = Old ratio - New ratio
X's sacrifice ratio = (2/4) - (3/4) = 1/4
Y's sacrificing ratio = (1/4) - (1/4) = 0
Therefore, Goodwill of Rs. 4000 brought in by Z is credited to X only, as only X is sacrificing here.
Question 3
1 / -0

The profits of last three years are $$Rs.42,000$$; $$Rs.39,000$$ and $$Rs.45,000$$. Find out goodwill of $$2$$ years purchase.

A
$$Rs.42,000$$

B
$$Rs.84,000$$

C
$$Rs.1,26,000$$

D
$$Rs.36,000$$

Solution

Calculation of goodwill-
1. Average profit = Total profit/ No. of years
Average profit = Rs. (42000 + 39000 + 45000)/ 3
Average profit = Rs. 126000/ 3
Average profit = Rs. 42000
2. Goodwill = Average profit * No. of years purchase
Goodwill = Rs. 42000 * 2
Goodwill = Rs. 84000
Question 4
1 / -0

Y & W were in partnership sharing profit & losses equally. They admit S as a partner and decide to share profits equally. Goodwill is valued at Rs.$$60,000$$ but is to be immediately written off. The effect of this on Y's capital would be to ___________.

A
increase it by $$Rs.10,000$$

B
increase it by $$Rs.30,000$$

C
decrease it by $$Rs.20,000$$

D
decrease it by $$Rs.10,000$$

Solution

At the time of admission of a new partner, goodwill brought in by new partner is distributed among sacrificing partner in their sacrificing ratio.
Old ratio (Y and W) = 1 : 1
New ratio (Y, W and S) = 1 : 1 : 1
Sacrificing ratio = Old ratio - New ratio
Y's sacrifice = (1/2) - (1/3) = 1/6
W's sacrifice = (1/2) - (1/3) = 1/6
Therefore, 1/6th of goodwill Rs. 60000 i.e., Rs 10000 is credited to Y's capital account, it means Y's capital account is increased by Rs. 10000
Question 5
1 / -0

Sometimes, the value of Goodwill has to be inferred from the agreement of capitals and profit sharing ratio among the partners, it is known as _______.

A
Adjusted Gooodwill

B
Premium for capital

C
Premium for goodwill

D
Hidden Goodwill

Solution

Hidden goodwill is the excess of desired total capital of the firm over the actual combined capital of all partner.
Following is the accounting treatment of Hidden Goodwill:
Value of Hidden Goodwill = Capitalized value of firm - Net worth.
Question 6
1 / -0

Find the goodwll of the firm using capilatalization method from the following information:
Capital employed Rs.$$4,80,000$$
Rate of normal - $$15\%$$
Profits for the year Rs.$$90,000$$

A
Rs.$$4,20,000$$

B
Rs.$$3,11,000$$

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

D
Rs.$$2,20,000$$
Question 7
1 / -0

Capital employed by a partnership firm is Rs. $$1,00,000$$. Its average profit is Rs. $$20,000$$. Normal rate of return is $$15\%$$. Value of goodwill.

A
Rs. $$33,333$$

B
Rs. $$30,000$$

C
Rs. $$23,333$$

D
Rs. $$43,667$$
Question 8
1 / -0

A & B shares profit and losses equally. The admit C as an equal partner and assets were revalued as follow: Stock at Rs.$$20,000$$ (book value Rs.$$12,000$$); Machinery at Rs.$$60,000$$ (book value Rs.$$55,000$$). Find profit/loss on revaluation to be shared among A & B.

A
Profit $$6,500$$ & $$6,500$$

B
Profit $$4,000$$ & $$4,000$$

C
Profit $$2,500$$ & $$2,500$$

D
None of the above
Question 9
1 / -0

At the time of retirement of a partner full good will is credited to the accounts of ______________.

A
all partners

B
only retiring partner

C
only remianing partner

D
none of the above
Question 10
1 / -0

X & Y share profits & 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.$$4,500$$ as premium for goodwill. The full value of goodwill will be _____________.

A
$$Rs.24,000$$

B
$$Rs.27,000$$

C
$$Rs.18,000$$

D
$$Rs.4,500$$

Solution

Z is admitted for 1/6th share of profit
Z's contribution of Rs. 4500 consists of 1/6 share of goodwill only
Thereforfe, total goodwill of firm should be Rs. 4500 * (6/1) = 27000

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Admission of a Partner Test - 47

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Admission of a Partner Test - 47

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SHARING IS CARING

Question 1

New profit sharing ratio

Old profit sharing ratio

Scarifying ratio

Capital ratio

Question 2

X & Y as $$Rs.3,000$$ & $$Rs.1,000$$ respectively

X only

Y only

None of the above

Solution

Question 3

$$Rs.42,000$$

$$Rs.84,000$$

$$Rs.1,26,000$$

$$Rs.36,000$$

Solution

Question 4

increase it by $$Rs.10,000$$

increase it by $$Rs.30,000$$

decrease it by $$Rs.20,000$$

decrease it by $$Rs.10,000$$

Solution

Question 5

Adjusted Gooodwill

Premium for capital

Premium for goodwill

Hidden Goodwill

Solution

Question 6

Rs.$$4,20,000$$

Rs.$$3,11,000$$

Rs.$$1,20,000$$

Rs.$$2,20,000$$

Question 7

Rs. $$33,333$$

Rs. $$30,000$$

Rs. $$23,333$$

Rs. $$43,667$$

Question 8

Profit $$6,500$$ & $$6,500$$

Profit $$4,000$$ & $$4,000$$

Profit $$2,500$$ & $$2,500$$

None of the above

Question 9

all partners

only retiring partner

only remianing partner

none of the above

Question 10

$$Rs.24,000$$

$$Rs.27,000$$

$$Rs.18,000$$

$$Rs.4,500$$

Solution

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