Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 22

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Weekly Quiz Competition

Question 1
1 / -0

X,Y and Z are three partners in a firm. Y died on 1st January.The firm had taken a life policy of Rs.18,000 at an annual premium of Rs.700. On the date of death of Y the JLP appears a Rs 1800. The Policy was duly received. How the profit on JLP will be distributed?

A
Dr. Cash $$Rs.10,000$$, Dr. XYZ $$Rs.3333.33$$, Cr. JLP $$Rs.20,000$$.

B
Dr. Cash $$Rs.20,000$$ Cr. JLP $$Rs.20,000$$.

C
Dr. JLP $$Rs.16,200$$, Cr. XYZ $$Rs.5400$$ each.

D
Dr. JLP $$Rs.18,000$$, Cr. profit and loss A/c $$Rs.8,000$$.

Solution

A Joint Life Policy (JLP) is an insurance policy which is taken out by the partnership firm on the joint lives of all partners. The amount of policy is payable by the insurance company either on the death or maturity of policy, whichever is earlier. The firm pays annual premium to the insurer against the policy.
If joint life policy is appeared in balance sheet, Accounting treatment of joint life policy on the death of a partner is:
(1) Bank A/c Dr. 18000
To Joint life policy A/c 18000
(Policy value received from the insurance company on Y's death)

(2) Joint Life policy A/c Dr. 16200
To X's capital A/c 5400
To Y's capital A/c 5400
To Z's capital A/c 5400
However, if joint life policy does not appear in balance sheet, then the entry (2) is to be passed for Rs. 24000 and it would be appear as follows:
Joint Life policy A/c Dr. 18000
To X's capital A/c 6000
To Y's capital A/c 6000
To Z's capital A/c 6000
Question 2
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When goodwill is revalued at the time of admission of a partner, how goodwill is distributed amongst the old partners?

A
Equally.

B
Capital ratio.

C
Sacrifice ratio.

D
New profit sharing ratio.

Solution

In case of admission of a partner, goodwill cannot be raised in the books of the firm because in consideration in money or money;s worth is paid for it. If incoming partner brings any premium over and above his capital contribution at the time of his admission, such premium should be distributed to other existing partners. When a new partner is admitted to a firm, the old partner generally sacrifice in favour of the new partner in terms of lower profit sharing ratio in the future. Therefore, the premium for goodwill brought in by the new partner shall be given to the existing partners on the basis of profit sacrificing ratio.
Question 3
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Consequent upon admission of a new partner in a firm the value of the goodwill is valued at Rs.60,000. But there exists a goodwill account in the balance sheet which stood at Rs.48,000 what would be treatment of goodwill at the time of admission of a new partner. If memorandum revaluation method is followed, after admission of a new partner?

A
Rs.12,000 would be debited to all the partner's capital account in their new profit sharing ratio

B
Rs.60,000 would be debited to old partner's capital account in their old profit sharing ratio

C
Rs.48,000 would be debited to all the partner's capital account in their new profit sharing ratio

D
Rs.48,000 would be credited to all the partner's capital account in their new profit sharing ratio
Question 4
1 / -0

_______ can be described as the sum of those intangible attributes or benefits enjoyed by the enterprise which contributes to its success.

A
Research and Development

B
Goodwill

C
Deferred revenue expenditure

D
Intangible assets
Question 5
1 / -0

The need for valuation of goodwill arises in all the following situations except

A
Admission of a partner

B
Retirement of a partner

C
Change in profit sharing ratio

D
Illness of a partner
Question 6
1 / -0

Goods worth Rs.2000 distributed as free sample, which A/c will be debited _________.

A
Trading A/c.

B
Profit and loss appropriation A/c.

C
Sale promotion expenses A/c.

D
Charity A/c.
Question 7
1 / -0

Which of these is an essential qualification to be a partner of a firm?

A
High net worth Individual.

B
Graduate in Business Administration.

C
Must be competent to contract.

D
Possessing Aadhar Card.

Solution

The essential qualification to be a partner of a firm is the the parftner must be competent to cantract. It means to become a partner in the partnership firm should have capacity to contract.
Following are the persons who are competent to contract:
1. Every person who has attained the age of majority.
2. Every person who is of sound mind.
3. Every person who is not otherwise disqualified from contracting.
Question 8
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The term "person" for the purpose of a partnership agreement does not include a __________.

A
Firm

B
Senior citizen

C
Pardanashin women

D
Non-Pan card holder

Solution

A partnership firm is not a person and therefore a firm cannot enter into partnership with any firm or individual. But a partner of the partnership firm can enter into partnership with other persons and he can share the profits of the said firm with his other co-partners of the parent firm. Hence, option A is correct.
Question 9
1 / -0

A and B are two partners in a firm having share capital of Rs. 13,000 and Rs.17,000 respectively. C is admitted for 1/3rd share of profit for which he is to bring Rs.20,000 for his share of capital. What is the goodwill of the firm?

A
$$Rs.9,000$$

B
$$Rs.10,000$$

C
$$Rs.8,000$$

D
$$Rs.11,000$$

Solution

When the value of the 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. 20000 * (3/1)] - Rs. (13000 + 17000 + 20000)
Goodwill = Rs. 60000 - Rs. 50000
Goodwill = Rs. 10000
Question 10
1 / -0

Select the odd one out.

A
No requirement for minimum number of members.

B
No limit on number of members.

C
Governed by Hindu law.

D
Minor cannot be admitted.

Solution

Following are a few features of a Joint Hindu Family Business:
1. The business does not require any agreement as membership is by birth, i.e. minor can also be a member.
2. It is governed by the Hindu Succession Act, 1956.
3. The maximum number of members is unlimited in Joint Hindu Family Firm.
4. Being a Hindu undivided family there must be a minimum of two related family members.

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Retirement or Death of a partner Test - 22

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Retirement or Death of a partner Test - 22

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Question 1

Dr. Cash $$Rs.10,000$$, Dr. XYZ $$Rs.3333.33$$, Cr. JLP $$Rs.20,000$$.

Dr. Cash $$Rs.20,000$$ Cr. JLP $$Rs.20,000$$.

Dr. JLP $$Rs.16,200$$, Cr. XYZ $$Rs.5400$$ each.

Dr. JLP $$Rs.18,000$$, Cr. profit and loss A/c $$Rs.8,000$$.

Solution

Question 2

Equally.

Capital ratio.

Sacrifice ratio.

New profit sharing ratio.

Solution

Question 3

Rs.12,000 would be debited to all the partner's capital account in their new profit sharing ratio

Rs.60,000 would be debited to old partner's capital account in their old profit sharing ratio

Rs.48,000 would be debited to all the partner's capital account in their new profit sharing ratio

Rs.48,000 would be credited to all the partner's capital account in their new profit sharing ratio

Question 4

Research and Development

Goodwill

Deferred revenue expenditure

Intangible assets

Question 5

Admission of a partner

Retirement of a partner

Change in profit sharing ratio

Illness of a partner

Question 6

Trading A/c.

Profit and loss appropriation A/c.

Sale promotion expenses A/c.

Charity A/c.

Question 7

High net worth Individual.

Graduate in Business Administration.

Must be competent to contract.

Possessing Aadhar Card.

Solution

Question 8

Firm

Senior citizen

Pardanashin women

Non-Pan card holder

Solution

Question 9

$$Rs.9,000$$

$$Rs.10,000$$

$$Rs.8,000$$

$$Rs.11,000$$

Solution

Question 10

No requirement for minimum number of members.

No limit on number of members.

Governed by Hindu law.

Minor cannot be admitted.

Solution

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