Admission of a Partner Test

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Admission of a Partner Test - 69

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Weekly Quiz Competition

Question 1
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 goodwill on average profit method.

A
Rs 2,37,000

B
Rs 1,77,000

C
Rs 1,37,000

D
Rs 1,73,000
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 of 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

A & B are partners with capitals of $$Rs.10,000$$ and $$Rs.20,000$$ respectively and sharing profits equally. They admitted C as their third partner with 1/4th 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

When the value of goodwill of the firm is not specifically given, the value of goodwill has to be inferred as follows:
Goodwill = (Incoming partner's capital * Reciprocal of share of incoming partner) - Total capital after taking into consideration the capital brought in by incoming partner.
Goodwill = Rs. 12000 * (4/1) - Rs. (10000 + 20000 + 12000)
Goodwill = Rs. 48000 - Rs. 42000
Goodwill = Rs. 6000
Question 4
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 purchases - 3 years

A
Rs. 6,00,000

B
Rs. 2,70,000

C
Rs. 9,00,000

D
Rs. 3,70,000

Solution
Question 5
1 / -0

A & B shares profit and losses equally. They admit C as equal partner and goodwill was valued as Rs 60,000 (book value NIL). C is to bring in Rs 40,000 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 partner's capital account?

A
A & B's account credited with Rs 10,000 each.

B
All partners account credited with Rs 20,000 each.

C
Only C's account credited with Rs 20,000 as cash bought in for goodwill.

D
Final effect will be nil in each partner.
Question 6
1 / -0

A & B were partners sharing profits & losses in the ratio of 3:1. C was admitted to the firm on the following terms:
C would provide Rs 1,00,000 as a capital and pay Rs 20,000 as goodwill for his 1/3rd share in future profits. Goodwill account would not appear in the books. A, B & C would share profits equally. Which of the following journal is correct in relation to premium for goodwill Rs 20,000 brought in by new partner?

A

B

C

D

Solution
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

A & B are partners sharing the profit in the ratio of 3:2. Thay take C as a new partner, who is supposed to bring Rs 25,000 against capital and Rs 10,000 against goodwill. New profit sharing ratio is 1:1:1. C is able to bring Rs 30,000 only. How this will be treated in the book of the firm?

A
A & B will share goodwill brought by C as Rs 4,000: Rs 1,000

B
Goodwill not brought, will be adjusted to the extent of Rs 15,000 in old profit sharing ratio.

C
Both (A) & (B)

D
None of above
Question 9
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 ratio 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
Question 10
1 / -0

The profits and losses for the last years are:
Year Profit/(loss)
2001-2002 (20,000)
2002-2003 (5000)
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