Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 35

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Weekly Quiz Competition

Question 1
1 / -0

A & B are equal partners. They admit C and D as partners with $1/5$ th and $1/6$ th share respectively. What is the profit sharing ratio of all the partners?

A
$27:18:5:6$

B
$28:17:5:6$

C
$5:4:5:6$

D
$19:19:12:10$

Solution

Old ratio (A and B) 1 : 1
C admits for 1/5th share
D admits for 1/6th share
Let the combined share of all the partners after C's and D's admission = 1
Combined share of A and B in the new firm = 1 - (1/5) - (1/6)
19/30
New ratio = Old ratio * Combined share of A and B
A's new ratio = (1/2) * (19/30) = 19/60
B's new ratio = (1/2) * (19/30) = 19/60
C's share = 1/5 or 12/60
D's share = 1/6 or 10/60
New profit sharing ratio of A : B : C : D = 19 : 19 : 12 : 10
Question 2
1 / -0

A & B are partners sharing the profit in the ratio of $3:2$ . They take C as the new partner, who is supposed to bring Rs. $50,000$ against capital and Rs. $20,000$ against goodwill. New profit sharing ratio is $1:1:1$ . C brought cash for his share of Capital and agreed to compensate to A and B outside the firm. How this will be treated in the books of the firm?

A
Cash brought in by C will only be credited to his capital account.

B
Goodwill will be raised to full value in old ratio.

C
Goodwill will be raised to full value in new ratio.

D
Cash brought by C will be credited to his account and debited with his share of goodwill, which will be debited to A and B's account in sacrificing ratio.

Solution

When the new partner does not brings the amount of goodwill in cash and compensate the old partners in private or outside the firm, there will be no treatment for the amount of goodwill. Only the capital brought in by the new partner will be credited to his capital A/c.
Therefore, A is the correct option.
Question 3
1 / -0

Goodwill valuation is not required to be done in the following condition

A
Partnership business is being changed

B
Business is sold

C
At the time profit is being distributed among the partners at the end of financial year

D
All of the above
Question 4
1 / -0

A partner retires but the business is still being carried on

A
Profit sharing between the remaining partners will remain same

B
Share proportion remains same

C
Share proportion changes

D
Both a & c
Question 5
1 / -0

The correct equation for calculation of super profit method used for calculation of Goodwill is

A
Annual profit-fair return of capital employed

B
Average annual profit - fair return of capital employed

C
Average annual profit- current profit of the firm

D
None of the above
Question 6
1 / -0

The correct equation for calculation of super profit method used for calculation of Goodwill is

A
Annual profit-fair returnof capitalemployed

B
Average annual profit -fair returnof capitalemployed

C
Average annual profit-current profit of the firm

D
None of the above
Question 7
1 / -0

When a partner dies, the _________.

A
profit share of the deceased partner is divided amongst the remaining partner and the firm continues its business

B
deceased partners share is given to his legal representative

C
both (A) & (B)

D
none of the above

Solution

When the partner dies, reconstitution of firm takes place and partners continue to carry on business. In reconstitution, assets and liabilities are revalued, Profit sharing ratio of partners is revised and new profit sharing ratio is calculated i.e., profit share of the deceased partner is shared among remaining partners, goodwill is raised, joint life policy if any is taken into consideration and finally, the amount due to the deceased partner is determined and discharged.
Question 8
1 / -0

A partner retires but the business is still being carried on __________.

A
Profit sharing between the remaining partners will remain same

B
Share proportion remains same

C
Share proportion changes

D
Both a & c
Question 9
1 / -0

Goodwill should be tested for value impairment at which of the following levels?

A
Each identifiable long-term asset.

B
Each reporting unit.

C
Each acquisition unit.

D
Entire business as a whole.
Question 10
1 / -0

Sometimes, the partners of a firm decide to change their _________ profit sharing ratio without the admission or retirement of a partner.

A
old

B
new

C
existing

D
both a and b

Solution

One of the forms of reconstitution of the firm is Change in Profit Sharing Ratio among Existing Partners. Without any admission or retirement of the partner, sometimes the partners may decide to change their existing profit sharing ratio. This may result in the gain to a few partners and loss to others.

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Retirement or Death of a partner Test - 35

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Retirement or Death of a partner Test - 35

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SHARING IS CARING

Question 1

27:18:5:627:18:5:627:18:5:6

28:17:5:628:17:5:628:17:5:6

5:4:5:65:4:5:65:4:5:6

19:19:12:1019:19:12:1019:19:12:10

Solution

Question 2

Cash brought in by C will only be credited to his capital account.

Goodwill will be raised to full value in old ratio.

Goodwill will be raised to full value in new ratio.

Cash brought by C will be credited to his account and debited with his share of goodwill, which will be debited to A and B's account in sacrificing ratio.

Solution

Question 3

Partnership business is being changed

Business is sold

At the time profit is being distributed among the partners at the end of financial year

All of the above

Question 4

Profit sharing between the remaining partners will remain same

Share proportion remains same

Share proportion changes

Both a & c

Question 5

Annual profit-fair return of capital employed

Average annual profit - fair return of capital employed

Average annual profit- current profit of the firm

None of the above

Question 6

Annual profit-fair returnof capitalemployed

Average annual profit -fair returnof capitalemployed

Average annual profit-current profit of the firm

None of the above

Question 7

profit share of the deceased partner is divided amongst the remaining partner and the firm continues its business

deceased partners share is given to his legal representative

both (A) & (B)

none of the above

Solution

Question 8

Profit sharing between the remaining partners will remain same

Share proportion remains same

Share proportion changes

Both a & c

Question 9

Each identifiable long-term asset.

Each reporting unit.

Each acquisition unit.

Entire business as a whole.

Question 10

old

new

existing

both a and b

Solution

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$27:18:5:6$

$28:17:5:6$

$5:4:5:6$

$19:19:12:10$