Admission of a Partner Test

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Admission of a Partner Test - 56

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Weekly Quiz Competition

Question 1
1 / -0

P and Q are partners sharing Profits in the ratio of 2:1. R is admitted to the partnership with effect from 1st April on the term that he will bring Rs. 40,000 as his capital for 1/4th share and pays Rs. 18,000 for goodwill, half of which is to be withdrawn by P and Q. How much cash can P & Q withdraw from the firm (if any)?

A
Rs. 6,000: Rs. 3,000.

B
Rs. 12,000 : Rs. 6,000.

C
NIL.

D
None of the above.
Question 2
1 / -0

Accumulated profits/losses & reserves on the retirement of a partner are shared by the partners in their __________.

A
Capital ratio

B
New profit sharing ratio

C
Old profit sharing ratio

D
Gaining ratio

Solution

The retiring partner is entitled to his share of profits or losses in old ratio that have arisen till the date of his retirement.
Accumulated profits or losses are transferred to the capital account of all partners including retiring or deceased partners in their old profit sharing ratio.
Question 3
1 / -0

Partners Capital A/c is debited _________.

A
to record the profit on revaluation

B
to record the General Reserve

C
to record the P & L A/c (Dr.)

D
to record the shortage of capital brought in

Solution

When there is accumulated losses like debit balance of P&L A/c is shown in balance sheet, it will be debited to partners' capital A/c in the old profit sharing ratio. Journal entry for distributing accumulated losses:
Accumulated losses A/c Dr. XXX
To partners' capital A/c XXX
Therefore, C is the correct option.
Question 4
1 / -0

Under capitalisation of super profit method, goodwill is calculated by ___________.

A
no. of years purchased multiplied with average profits

B
no. of years purchased multiplied with super profits

C
summation of the discounted multiplied with super profits

D
super profit divided with expected rate of return

Solution

Formula for calculating goodwill by capitalisation of super profit method
Value of goodwill = (Super profit/Normal rate of return)x100
Therefore, D is the correct option.
Question 5
1 / -0

A, B and C are partners yeah profits sharing ratio of 4 : 3: 2.B retires and Goodwill of Rs. 10,800 was valued. If A & C share future profits in the ratio of 5 : 3, then the amount of goodwill to be shared between A and C will be _______.

A
Rs. 1,850 and Rs. 1,959

B
Rs. 1,650 and Rs. 1,750

C
Rs. 2,000 and Rs. 1,600

D
Rs. 1,950 and Rs. 1,650

Solution

1. Calculation of gaining ratio
Old ratio (A, B and C) = 4 : 3 : 2
B retires from the firm
New artio (A and C ) = 5 : 3
Gaining ratio = New ratio - Old ratio
A's new share = (5/8) - (4/9) = (45 - 32) /72 = 13/72
C's new share = (3/8) - (2/9) = (27 - 16) / 36 = 11/72
gaining ratio = 13 : 11
2. Adjustment of goodwill
C's share of goodwill = (10800 * 3) / 9 = 3600
This share of goodwill is to be debited to remaining partners' capital account in their gaining ratio (i.e., 13 : 11 )
Journal entry for the above will be:
A's capital A/c Dr. 1950
C's capital A/c Dr. 1650
To B's capital A/c 3600
Question 6
1 / -0

Under super profit method goodwill is calculated by ___________.

A
no. of years purchased multiplied with average profits

B
no. of years purchased multiplied with super profits

C
summation of the discounted multiplied with super profits

D
super profit divided with expected rate of return
Question 7
1 / -0

Retiring Partners share of goodwill is debited to remaining partners in their _________.

A
capital ratio

B
new profit sharing ratio

C
old profit sharing ratio

D
gaining ratio

Solution

At the time of retirement of partner, reconstitution takes place in which Assets and liabilities are revalued, profit sharing ratio is revised, goodwill is raised etc. Remaining partners share the profit of retiring partner in future therefore, at the time of retirement of partner remaining partner has to compensate to retiring partner. Therefore, retiring partners share of goodwill is debited to remaining partner in their gaining ratio.
Question 8
1 / -0

Under annuity, basis goodwill is calculated by __________.

A
no. of years purchased multiplied with average profits

B
no. of years purchased multiplied with super profits

C
summation of the discounted multiplied with super profits

D
super profit divided with expected rate of return
Question 9
1 / -0

A and B share profits in the ratio of 3: 2. C is admitted. A and B will in future get a 2/6th and 3/6th share of profit. The share of C will be ______.

A
8/30

B
3/30

C
5/30

D
None of these
Question 10
1 / -0

Revaluation Account is debited _______.

A
due to an increase in Provision for doubtful debts

B
due to an increase In value of Land & Building

C
due to an decrease in amount of creditors

D
to transfer loss on revaluation

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Admission of a Partner Test - 56

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Admission of a Partner Test - 56

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SHARING IS CARING

Question 1

Rs. 6,000: Rs. 3,000.

Rs. 12,000 : Rs. 6,000.

NIL.

None of the above.

Question 2

Capital ratio

New profit sharing ratio

Old profit sharing ratio

Gaining ratio

Solution

Question 3

to record the profit on revaluation

to record the General Reserve

to record the P & L A/c (Dr.)

to record the shortage of capital brought in

Solution

Question 4

no. of years purchased multiplied with average profits

no. of years purchased multiplied with super profits

summation of the discounted multiplied with super profits

super profit divided with expected rate of return

Solution

Question 5

Rs. 1,850 and Rs. 1,959

Rs. 1,650 and Rs. 1,750

Rs. 2,000 and Rs. 1,600

Rs. 1,950 and Rs. 1,650

Solution

Question 6

no. of years purchased multiplied with average profits

no. of years purchased multiplied with super profits

summation of the discounted multiplied with super profits

super profit divided with expected rate of return

Question 7

capital ratio

new profit sharing ratio

old profit sharing ratio

gaining ratio

Solution

Question 8

no. of years purchased multiplied with average profits

no. of years purchased multiplied with super profits

summation of the discounted multiplied with super profits

super profit divided with expected rate of return

Question 9

8/30

3/30

5/30

None of these

Question 10

due to an increase in Provision for doubtful debts

due to an increase In value of Land & Building

due to an decrease in amount of creditors

to transfer loss on revaluation

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