Admission of a Partner Test

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Admission of a Partner Test - 66

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Weekly Quiz Competition

Question 1
1 / -0

From the following information calculate the value of goodwill.
The adjusted forecast maintainable profit is Rs. $$40,000$$, Capital employed is Rs. $$2,00,000$$, Normal rate of return is $$15\%$$, Capitalization rate is $$20\%$$.

A
Rs. $$50,000$$

B
Rs. $$75,000$$

C
Rs. $$40,000$$

D
Rs. $$60,000$$
Question 2
1 / -0

The net profits after tax of Z & Co. for the past $$5$$ years are as follows.
Year Profit
$$2007-2008$$ $$2,56,000$$
$$2008-2009$$ $$2,64,000$$
$$2009-2010$$ $$3,76,000$$
$$2010-2011$$ $$4,86,000$$
$$2011-2012$$ $$5,30,500$$
The capital employed is Rs. $$16,00,000$$. Rate if normal return is $$15\%$$. Calculate the value of the goodwill on the basis of annuity method on super-profits basis, taking the present value of an annuity of Rs. $$1$$ for the $$4$$ years at $$15\%$$ as $$2.855$$.

A
Rs. $$7,65,000$$

B
Rs. $$8,67,800$$

C
Rs. $$5,70,000$$

D
Rs. $$4,06,838$$
Question 3
1 / -0

The net profits after tax of NZ & Co. for the past $$3$$ years are as follows.
Year Profit
$$2010-2011$$ $$20,000$$
$$2011-2012$$ $$2,61,000$$
$$2012-2013$$ $$3,12,000$$
Closing stock for $$2011-2012$$ and $$2012-2013$$ includes the defective items of Rs. $$22,000$$ and Rs. $$62,000$$ respectively which were considered as having no market value. Calculate average profit for goodwill.

A
Rs. $$2,37,000$$

B
Rs. $$1,77,000$$

C
Rs. $$1,37,000$$

D
Rs. $$1,73,000$$

Solution

Defective items should be deducted from respective profits to arrive at a correct net profit.
Since Closing Stock for 2011-12 includes defective items of $$Rs.22,000$$, this shall have an impact in not only 2011-12 profits but also 2012-13 profits.
Therefore, re-calculation net profits for all the years:
1.Year 2010-11: $$Rs.20,000$$-no adjustment= $$Rs.20,000$$
2.Year 2011-12: $$2,61,000$$-$$Rs.22,000$$=$$Rs.2,39,000$$
3.Year 2012-13: $$3,12,000$$+$$Rs.22,000$$-$$Rs.62,000$$=$$2,72,000$$
Average profit: $$Rs.20,000$$+$$Rs.2,39,000$$+$$Rs.2,72,000$$=$$Rs.5,31,000$$ /$$3$$=$$Rs.1,77,000$$
Question 4
1 / -0

The profits and 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 return expected from capital invested is $$12\%$$. The remuneration of partners is estimated to be Rs. $$1,000$$ per month not charged in the above losses/profits. Calculate the value of goodwill on the basis of two years purchase of super profits based on the average profit of $$4$$ years.

A
Rs. $$9,000$$

B
Rs. $$8,750$$

C
Rs. $$8,500$$

D
Rs. $$8,250$$

Solution
Question 5
1 / -0

The profits and losses for the last years are:
Year Profit/(loss)
$$2001-2002$$ $$(20,000)$$
$$2002-2003$$ $$(5,000)$$
$$2003-2004$$ $$1,96,000$$
$$2004-2005$$ $$1,52,000$$
The average capital employed in the business is Rs. $$4,00,000$$. The rate of interest expected from capital invested is $$12\%$$. The remuneration of partners is estimated to be Rs. $$2,000$$p.m. not charged in the above losses/profits. Calculate the value of goodwill on the basis of $$2$$ years purchase of super profits based on the average of four years.

A
Rs. $$18,000$$

B
Rs. $$17,500$$

C
Rs. $$17,000$$

D
Rs. $$16,500$$
Question 6
1 / -0

A & B shares profit & losses equally. They admit C as an equal partner and goodwill was valued at Rs.$$30,000$$ (book value NIL). C is to bring in Rs.$$20,000$$ as his capital and the necessary cash towards his share of goodwill. Goodwill Account will not remain in the books. What will be the final effect of goodwill in the partners' capital account?

A
A & B's account credited with Rs.$$5,000$$ each.

B
All partner's account credited with Rs.$$10,000$$ each

C
Only C's account credited with Rs.$$10,000$$ as cash bought in for goodwill

D
Final effect will be nil in each partner

Solution
Question 7
1 / -0

A & B are partners with capitals of $$Rs.14,000$$ and $$Rs.28,000$$ respectively and sharing profits equally. They admitted C as their third partner with $$1/4$$ profits of the firm on the payment of $$Rs.16,800$$. The amount of hidden goodwill is _________.

A
$$Rs.8,400$$

B
$$Rs.14,000$$

C
$$Rs.11,200$$

D
None of the above

Solution

When goodwill value is not given in question asked it is calculated on the basis of total capital and profit sharing ratio.
C brings Rs. 16800 for 1/4 share in the firm.
Calculation of hidden goodwill :
Full capital of the firm will be [16800 * (4/1)] = Rs. 67200
Less : Total capitals of A + B + C = Rs. (14000 + 28000 + 16800) = Rs. 58800
Hidden goodwill Rs. 8400
Question 8
1 / -0

A & B shares profit & losses equally. They admit C as an equal partner and assets were revalued as follow: Goodwill at Rs. $$30,000$$(book value NIL). Stock at Rs. $$20,000$$(book value Rs. $$12,000$$); Machinery at Rs. $$60,000$$(book value Rs. $$55,000$$). C is to bring in Rs. $$20,000$$ as his capital and the necessary cash towards his share of Goodwill. Goodwill Account will not be shown in the books. Find the profit/loss on revaluation to be shared among A, B & C.

A
$$21,500 : 21,500 : 0$$

B
$$6,500 : 6,500 : 0$$

C
$$14,333 : 14,333 : 14,333$$

D
$$4,333 : 4,333 : 4,333$$
Question 9
1 / -0

X & Y share profits & losses as $$1:2$$. They agree to admit Z (who is also in business on his own) as a third partner.
At the time of admission of Z goodwill was appearing in balance sheet at Rs.$$14,000$$ which was revalued at Rs.$$18,000$$. Z brings the following assets into the partnership:
Goodwill- Rs.$$6,000$$ Furniture-Rs.$$2,800$$, Stock-Rs.$$13,600$$
After admission of Z, goodwill will appear at _______ in the balance sheet.

A
Rs.$$14,000$$

B
Rs.$$18,000$$

C
Rs.$$24,000$$

D
Rs.$$26,000$$
Question 10
1 / -0

A,B & C were equal partners with goodwill $$Rs.1,20,000$$ in the balance sheet and they agreed to take D as an equal partner on the term that he should bring $$Rs.1,60,000$$ as his capital and goodwill, his share of goodwill was evaluated at $$Rs.60,000$$ and the goodwill account is to be written off before admission. What will be the treatment for goodwill?

A
Write off the goodwill of $$Rs.1,20,000$$ in old ratio.

B
Cash brought in by D for goodwill will be distributed among old partners in sacrificing ratio.

C
Both (A) & (B).

D
None of the above.

Solution

At the time of admission of a new partner, goodwill brought in by new partner is distributed among old partners in their sacrificing ratio and before that goodwill which exist in balance sheet is distributed among old partner in their old ratio.
In the given question -
Old ratio (A, B and C) = 1 : 1 : 1
New ratio (A, B, C and D) = 1 : 1 : 1 : 1
Sacrificing ratio = Old ratio - New ratio
A's sacrifice = (1/3) - (1/4) = 1/12
B's sacrifice = (1/3) - (1/4) = 1/12
C's sacrifice = (1/3) - (1/4) = 1/12
Goodwill already exist in the books is distributed among old partner in old ratio. Journal entry fir this would be :
Goodwill A/c Dr. 120000
To A's Capital A/c 40000
To B' Capital A/c 40000
To C's Capital A/c 40000
Goodwill brought in by new partner is then distributed among sacrificing partners in sacrificing ratio.

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Year	Profit
$$2007-2008$$	$$2,56,000$$
$$2008-2009$$	$$2,64,000$$
$$2009-2010$$	$$3,76,000$$
$$2010-2011$$	$$4,86,000$$
$$2011-2012$$	$$5,30,500$$

Year	Profit/(loss)
$$2001-2002$$	$$(20,000)$$
$$2002-2003$$	$$(5,000)$$
$$2003-2004$$	$$1,96,000$$
$$2004-2005$$	$$1,52,000$$

Year	Profit
$$2010-2011$$	$$20,000$$
$$2011-2012$$	$$2,61,000$$
$$2012-2013$$	$$3,12,000$$

Admission of a Partner Test - 66

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Admission of a Partner Test - 66

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Rank

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SHARING IS CARING

Question 1

Rs. $$50,000$$

Rs. $$75,000$$

Rs. $$40,000$$

Rs. $$60,000$$

Question 2

Rs. $$7,65,000$$

Rs. $$8,67,800$$

Rs. $$5,70,000$$

Rs. $$4,06,838$$

Question 3

Rs. $$2,37,000$$

Rs. $$1,77,000$$

Rs. $$1,37,000$$

Rs. $$1,73,000$$

Solution

Question 4

Rs. $$9,000$$

Rs. $$8,750$$

Rs. $$8,500$$

Rs. $$8,250$$

Solution

Question 5

Rs. $$18,000$$

Rs. $$17,500$$

Rs. $$17,000$$

Rs. $$16,500$$

Question 6

A & B's account credited with Rs.$$5,000$$ each.

All partner's account credited with Rs.$$10,000$$ each

Only C's account credited with Rs.$$10,000$$ as cash bought in for goodwill

Final effect will be nil in each partner

Solution

Question 7

$$Rs.8,400$$

$$Rs.14,000$$

$$Rs.11,200$$

None of the above

Solution

Question 8

$$21,500 : 21,500 : 0$$

$$6,500 : 6,500 : 0$$

$$14,333 : 14,333 : 14,333$$

$$4,333 : 4,333 : 4,333$$

Question 9

Rs.$$14,000$$

Rs.$$18,000$$

Rs.$$24,000$$

Rs.$$26,000$$

Question 10

Write off the goodwill of $$Rs.1,20,000$$ in old ratio.

Cash brought in by D for goodwill will be distributed among old partners in sacrificing ratio.

Both (A) & (B).

None of the above.

Solution

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