Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 14

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Weekly Quiz Competition

Question 1
1 / -0

________ may be defined as the value of the reputation of the firm.

A
Capital

B
Goodwill

C
Drawings

D
Assets

Solution

A business builds up some reputation after it has continued for sometime. If the reputation is good it will come to acquire a fixed "CLIENTELE" . This very valuable asset even if one cannot feel or touch or see is defined as Goodwill.
Question 2
1 / -0

Goodwill is a _______ asset but not fictitious asset.

A
Tangible

B
Intangible

C
Personal

D
Nominal

Solution

Intangible asset in case of Goodwill is the value added to the firm which is realizable in nature, whereas fictitious assets do not posses any realizable value as they are created due to accounting entry due to the occurrence of deferred revenue expenditure.
Question 3
1 / -0

a) Dog - Goodwill 1. Fugitive good will
b) Cat - Good will 2. Locality good will
c) Rat - Good will 3. Personal good will

A
$$1, 2, 3$$

B
$$3, 2, 1$$

C
$$2, 1, 3$$

D
$$1, 3, 2$$
Question 4
1 / -0

If normal profit is $$Rs.50000$$, average profit is $$Rs.75000$$ than calculate Goodwill for $$2$$ years of purchase under super profit method_______.

A
$$Rs.45000$$

B
$$Rs.50000$$

C
$$Rs.55000$$

D
$$Rs.48500$$

Solution

Goodwill = Super Profit x no. of years of purchase.
Super Profit = Avg profit - Normal profit.
= $$Rs.75000$$ - $$Rs.50000$$ = $$Rs.25000$$.
Goodwill = $$Rs.25000$$ x $$2$$ = $$Rs.50000$$
Question 5
1 / -0

On the death of a partner, the amount of joint life policy should be credited to the capital account of _________.

A
remaining partners in the new profit ratio

B
all partners including the deceased partner in their old profit sharing ratio

C
neither the deceased partner nor the remaining partners

D
None of the Above
Solution
A Joint Life Policy (JLP) is an insurance policy that is taken by the partnership firm on the joint lives of all partners. The amount of the policy is payable by the insurance company either on the death of a partner or maturity of the policy, whichever is earlier. The firm pays an annual premium to the insurer against the policy.
On the death of a partner following entries are passed:
- Bank A/c Dr.
To Joint Life Policy A/c
(policy value received from the insurance company on partner’s death)
- Joint Life policy A/c Dr.
To All partner’s capital A/c (separately)
Therefore, on the death of a partner, the amount of joint life policy should be credited to the capital account of all partners, including the deceased partner, in their old profit sharing ratio.
Question 6
1 / -0

Under which of the following method Goodwill account is raised in the books of accounts.

A
Premium Method

B
Revaluation Method

C
Realisation Method

D
None of above

Solution

Goodwill is a fictitious asset which is generated in the business in due course of time. There are various factors which creates goodwill in the business like, sustainable growth of business, market repo of the organization, customer satisfaction, credit worthiness of the business etc.

As the time passes, the assets of the business get appreciated sometimes. A revaluation needs to be done for all such assets. Goodwill account is created in the books of account due to revaluation.
Question 7
1 / -0

The _______ is paid to new partner if his share of profit as per the profit sharing ratio is less then the guaranteed amount

A
minimum gaurantee amount

B
maximum gaurantee amount

C
less gaurantee amount

D
high gaurantee amount

Solution

Profit & Loss in partnership is a predefined term as per the partnership deed. Partners are supposed to share the profit & loss based on the defined profit sharing ratio.

Sometimes, a minimum guarantee is given to the new partner to safeguard interest of the new entrant.

Minimum guaranteed amount is that amount which a partner is supposed to get if his share of profit is less than the guaranteed amount.

For example, A, B and C are three partners with equal profit sharing ratio with a minimum guaranteed clause of Rs.150000/- to Mr.A. If the profit of the business is Rs.300000/- The profit as per agreed sharing ratio will be as under:
A - Rs.150000/- as profit based on sharing ratio is Rs.100000/- is lower than the minimum guaranteed amount.
Balance Rs.150000/- will be shared by B and C equally.
Question 8
1 / -0

Which of the following method is followed when incoming partner brings his share of Goodwill in cash___________.

A
Premium Method

B
Revaluation Method

C
Realisaton Method

D
None of Above

Solution

Incoming partner who acquires his share in the profits of the firm from the existing partners brings in some additional amount to compensate them for loss of their share in super profits. It is termed as his share of goodwill (also called premium).
Question 9
1 / -0

Tom and Ban are partners in a Firm for 2 : 1 ratio.
They admitted Jay as new partner for 1/5 share. calculate new ratio ?

A
3:4:8

B
8:4:3

C
2:3:1

D
4:3:8

Solution

Old ratio of Tom and Ban 2/3 and 1/3 respectively.
Jay share 1/5
step 1 :
remaining share = 1 - new partner share = 1-1/5= 4/5
new ratio = old ratio x rem share
Tom new share = 2/3 x 4/5 = 8/15
Ban new share = 1/3 x 4/5 = 4/15
Jay new share (equalize) = 1/5 x 3/3= 3/15
Question 10
1 / -0

A, B, C are partners in a firm sharing profits and losses in ratio 5:3:4. If Partner B dies than new profit sharing ratio will be ______.

A
5:4

B
3:2

C
Equal

D
1:2

Solution

Since there are 3 partners and partner B dies. In the absence of other information, it is assumed that both the continuing partners are gaining equally, hence their old ratio will increase in the same proportion.
New profit sharing ratio will be 5:4.

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Re-Attempt Weekly Quiz Competition

Retirement or Death of a partner Test - 14

Result

Retirement or Death of a partner Test - 14

Score

-

Rank

-

SHARING IS CARING

Question 1

Capital

Goodwill

Drawings

Assets

Solution

Question 2

Tangible

Intangible

Personal

Nominal

Solution

Question 3

$$1, 2, 3$$

$$3, 2, 1$$

$$2, 1, 3$$

$$1, 3, 2$$

Question 4

$$Rs.45000$$

$$Rs.50000$$

$$Rs.55000$$

$$Rs.48500$$

Solution

Question 5

remaining partners in the new profit ratio

all partners including the deceased partner in their old profit sharing ratio

neither the deceased partner nor the remaining partners

None of the Above

Solution

Question 6

Premium Method

Revaluation Method

Realisation Method

None of above

Solution

Question 7

minimum gaurantee amount

maximum gaurantee amount

less gaurantee amount

high gaurantee amount

Solution

Question 8

Premium Method

Revaluation Method

Realisaton Method

None of Above

Solution

Question 9

3:4:8

8:4:3

2:3:1

4:3:8

Solution

Question 10

5:4

3:2

Equal

1:2

Solution

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