Admission of a Partner Test

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Admission of a Partner Test - 65

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Weekly Quiz Competition

Question 1
1 / -0

On the admission of a new partner, it is believed that the assets have changed in value. to record a decrease in the value of an asset the double entry should be _____________________.

A
Debit-Asset A/c, Credit-Capital A/c

B
Debit-Asses A/c, Credit-Revaluation A/c

C
Debit-Revaluation A/c, Credit-Capital A/c

D
Debit-Revaluation A/c, Credit-Asset A/c
Question 2
1 / -0

A,B, & C are equal partners. D is admitted to the firm for $$1/4$$th share. D brings Rs.$$20,000$$ capital and Rs.$$5,000$$ being half of the premium for goodwill.
The value of goodwill of the firm is

A
Rs.$$10,000$$

B
Rs.$$40,000$$

C
Rs.$$20,000$$

D
None of the above
Question 3
1 / -0

The profits for $$2012-2013$$ is Rs.$$2,000$$; for $$2013-2014$$ is Rs.$$26,100$$ and for $$2014-2015$$ is Rs.$$31,200$$. Closing stock for $$2013-2014$$ and $$2014-2015$$ includes the defective items of Rs.$$2,200$$ and Rs.$$6,200$$ respectively which were considered as having market value nil. Calculate goodwill on average profit method.

A
Rs.$$23,700$$

B
Rs.$$17,700$$

C
Rs.$$13,700$$

D
Rs.$$17,300$$
Question 4
1 / -0

On $$1$$st April, $$2014$$ on the admission of a new partner, it is agreed that goodwill of the firm is valued at $$2$$years purchase of weighted average profits for the $$3$$ years. The profits for last $$3$$ years have been as follows:
Year ended Profits Weight
$$31$$st March $$2011$$ $$45,000$$ $$1$$
$$31$$st March $$2012$$ $$52,500$$ $$2$$
$$31$$st March $$2013$$
$$72,000$$ $$3$$

Value of goodwill will be

A
Rs.$$1,22,000$$

B
Rs.$$2,22,000$$

C
Rs.$$1,22,222$$

D
Rs.$$1,20,000$$

Question 5

1 / -0

A, B & C are partners sharing profits and loss in the ratio $$3:2:1$$. They decide to change their profit sharing ratio to $$2:2:1$$. To gave effect to this new profit sharing ratio, they decide to value the goodwill at Rs. $$30,000$$. Pass the necessary journal entry if Goodwill not appearing in the old balance sheet and should not appear in the new balance sheet.

B's Capital A/c Dr. C's Capital A/c Dr. To A's Capital A/c	$$2,000$$ $$1,000$$	$$3,000$$
Goodwill A/c Dr. To A's Capital A/c To B's Capital A/c To C's Capital A/c	$$30,000$$	$$12,000$$ $$12,000$$ $$6,000$$
A's Capital A/c Dr. B's Capital A/c Dr. C's Capital A/c Dr. To Goodwill A/c	$$12,000$$ $$12,000$$ $$6,000$$	$$30,000$$
A's Capital A/c Dr. To B's Capital A/c To C's Capital A/c	$$3,000$$	$$2,000$$ $$1,000$$

A

B

C

D

Solution

Sharing of profit (Old Ratio) = 15000 : 10000 : 5000

Sharing of profit (New Ratio) = 12000 : 12000 : 6000

Difference - A Cr. 3000 ; B Dr. 2000 ; C Dr. 1000

Question 6
1 / -0

Find the goodwill from the following information:
Capital employed Rs. $$8,25,000$$
Rate of normal return Rs. $$10\%$$
Future Maintainable profit Rs. $$1,50,000$$
Annuity factor Rs. $$3.17$$

A
Rs. $$4,75,500$$

B
Rs. $$2,61,525$$

C
Rs. $$3,13,975$$

D
Rs. $$2,13,975$$
Question 7
1 / -0

Profits & losses for the last years are:
$$2011-2012$$ Losses Rs. $$10,000$$
$$2012-2013$$ Losses Rs. $$2,500$$
$$2013-2014$$ Profits Rs. $$98,000$$
$$2014-2015$$ Profits Rs. $$76,000$$
The average capital employed in the business is Rs. $$2,00,000$$. The rate of interest expected from capital invested is $$12\%$$. The remuneration of partners is estimated to be Rs. $$1,000$$ per month. Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as $$10\%$$.

A
Rs. $$13,500$$

B
Rs. $$13,568$$

C
Rs. $$13,668$$

D
Rs. $$13,868$$
Question 8
1 / -0

The net profits of a business, after providing for income tax for the last $$5$$ years were: Rs. $$80,000$$, Rs. $$1,00,000$$, Rs. $$1,20,000$$, Rs. $$1,25,000$$ and Rs. $$2,00,000$$ respectively. The capital employed in the business is Rs. $$10,00,000$$ and the normal rate of return is $$10\%$$. Calculate the value of the goodwill on the basis of the annuity method taking the present value of annuity of Rs. $$1$$ for $$5$$ years at $$10\%$$ is $$3.7907$$.

A
Rs. $$84,768$$

B
Rs. $$95,768$$

C
Rs. $$94,768$$

D
Rs. $$60,000$$
Question 9
1 / -0

A firm of X,Y & Z has a total capital investment of Rs.$$3,60,000$$. The firm earned net profit during the last four years as Rs.$$56,000$$, Rs.$$64,000$$, Rs.$$96,000$$ and Rs.$$80,000$$. The fair return on the net capital employed is $$15\%$$. Value of goodwill if it is based on $$3$$ years purchase of the average super profits of past $$4$$years.

A
Rs.$$37,500$$

B
Rs.$$50,000$$

C
Rs.$$60,000$$

D
Rs.$$40,000$$
Question 10
1 / -0

A & B are partners with capitals of Rs.$$10,000$$ and Rs.$$20,000$$ respectively and sharing profits eqally. They admitted C as their third partner with $$1/4$$th profits on the payment of Rs.$$12,000$$. The amount of hidden goodwill is _______.

A
Rs.$$6,000$$

B
Rs.$$10,000$$

C
Rs.$$8,000$$

D
None of the above

Solution

Hidden Goodwill is the value of goodwill that is not mentioned at the time of admission of a new partner. If in the question, it is mentioned that the new partner requires to bring his/her share of goodwill, then in this case value of the firm's goodwill need to be calculated. It is calculated by taking the difference between the capitalised value of the firm and the net worth of the firm.
Value of Goodwill = Capitalised Value of Firm – Net Worth
Capitalised Value of Firm = C’s Capital × Reciprocal of his Share
= 12000 * (4/1)
Net Worth = Total Capital of New Firm (including C’s Capital)
= (10,000 + 20,000 +12000) = 42000
Value of Goodwill = 48000 - 42000 = 6000

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Year ended	Profits	Weight
$$31$$st March $$2011$$	$$45,000$$	$$1$$
$$31$$st March $$2012$$	$$52,500$$	$$2$$
$$31$$st March $$2013$$	$$72,000$$	$$3$$

Capital employed	Rs. $$8,25,000$$
Rate of normal return	Rs. $$10\%$$
Future Maintainable profit	Rs. $$1,50,000$$
Annuity factor	Rs. $$3.17$$

Admission of a Partner Test - 65

Result

Admission of a Partner Test - 65

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SHARING IS CARING

Question 1

Debit-Asset A/c, Credit-Capital A/c

Debit-Asses A/c, Credit-Revaluation A/c

Debit-Revaluation A/c, Credit-Capital A/c

Debit-Revaluation A/c, Credit-Asset A/c

Question 2

Rs.$$10,000$$

Rs.$$40,000$$

Rs.$$20,000$$

None of the above

Question 3

Rs.$$23,700$$

Rs.$$17,700$$

Rs.$$13,700$$

Rs.$$17,300$$

Question 4

Rs.$$1,22,000$$

Rs.$$2,22,000$$

Rs.$$1,22,222$$

Rs.$$1,20,000$$

Question 5

A

B

C

D

Solution

Question 6

Rs. $$4,75,500$$

Rs. $$2,61,525$$

Rs. $$3,13,975$$

Rs. $$2,13,975$$

Question 7

Rs. $$13,500$$

Rs. $$13,568$$

Rs. $$13,668$$

Rs. $$13,868$$

Question 8

Rs. $$84,768$$

Rs. $$95,768$$

Rs. $$94,768$$

Rs. $$60,000$$

Question 9

Rs.$$37,500$$

Rs.$$50,000$$

Rs.$$60,000$$

Rs.$$40,000$$

Question 10

Rs.$$6,000$$

Rs.$$10,000$$

Rs.$$8,000$$

None of the above

Solution

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