Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 37

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Question 1
1 / -0

From the following information calculate the value of goodwill.
The adjusted 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

Solution
Question 2
1 / -0

When required amount of premium for goodwill is not brought in by new partner, goodwill account is created in the books of the firm by debiting goodwill account and crediting partners capital account in ______.

A
New profit sharing ratio.

B
Old profit sharing ratio.

C
Sacrificing ratio.

D
Capital ratio.
Question 3
1 / -0

Find the goodwill of the firm using capitalization method from the following information:
Capital employed $$Rs.4,80,000$$;
Rate of normal return - $$15\%$$;
Profits for the year $$Rs.90,000$$.

A
$$Rs.4,20,000$$

B
$$Rs.3,11,000$$

C
$$Rs.1,20,000$$

D
$$Rs.2,20,000$$

Solution

Calculation of goodwill under capitalization basis-
Capital employed = Rs. 480000
Normal value of business = Average profit/capitalization rate
Normal value of business = Rs. 90000/ 15%
Normal value of business = Rs. 600000
Goodwill = Normal value of business - capital employed
Goodwill = Rs. 600000 - Rs. 480000
Goodwill = Rs. 120000
Question 4
1 / -0

The amount that the incoming partner pays for goodwill is known as ____________.

A
adjusted goodwill

B
premium for capital

C
premium for goodwill

D
hidden goodwill

Solution

Premium of goodwill is the amount brought in by the new partner to compensate the old partner for sacrificing the share in the profits in the firm. It is calculated by multiplying the incoming partner’s share of profit to the value of goodwill of the firm. Hence, option C is correct.
Question 5
1 / -0

Which of the following formula is/are used for valuation of goodwill under super profit basis?

A
Goodwill = Super profit x No. of years purchase.

B
Goodwill = Super profit x Annuity factor.

C
$$Goodwill = \frac{Super \ profit}{Capitalization \ rate} \times 100$$

D
Any of the above.
Question 6
1 / -0

A & B are partners sharing profit & losses in the ratio of 3:2. They take C as a partner for 1/4th share. Calculate future profit sharing ratio.

A
3:2:4

B
9:6:4

C
9:6:5

D
6:4:4

Solution

New PSR = 1 - 1/4 = 3/4
A = 3/4 * 3/5 = 9/20
B= 3/4 * 2/5 = 6/20
C= 1/4 *5/5 = 5/20
Question 7
1 / -0

A,B & C Care sharing profits in $$4:3:2$$ ratio. B retires. In A & C shares profits of B in $$5:3$$, then find the new profit sharing ratio.

A
$$47:25$$

B
$$17:11$$

C
$$31:11$$

D
$$14:21$$

Solution

Old ratio (A, B and C) = 4 : 3 : 2
B's share = 3/9
Share of B taken by A = (3/9) * (5/8) = 5/24
Share of B taken by C = (3/9) * (3/8) = 3/24
New profit sharing ratio = Old ratio + Share taken from B
A's new share = (4/9) + (5/24) = 47 : 72
C's new share = (2/9) - (3/24) = 25 : 72
Therefore, new profit sharing ratio of A and C = 47 : 25
Question 8
1 / -0

In which of the following case the need for the valuation of goodwill in a firm may arise?
(I) Admission of new partner
(II) While changing profit sharing ratio
(III) Retirement of partner
(IV) death of partner
Select the correct answer from the options given below

A
(I) & (III) only

B
(I) , (III) & (IV)

C
(I) , (II) & (III) only

D
All (I) to (IV)
Question 9
1 / -0

R & S are in partnership sharing profit and losses at the ratio 3:2. They take T as a new partner. Calculate the new profit sharing ratio. If T purchases 1/10th share from R.

A
27:18:5

B
28:17:5

C
5:4:1

D
19:19:12

Solution
Question 10
1 / -0

A, B & C are equal partners. D is admitted to the firm for one-fourth share. D brings Rs 40,000 capital and Rs 10,000 being half of the premium for goodwill. The value of goodwill of the firm is ________.

A
Rs. 20,000

B
Rs. 80,000

C
Rs. 40,000

D
None of the above

Solution

D bought Rs 10000 as half of the premium for goodwill.
Full amount of his share of goodwill 10000*2 =Rs 20000
Value of goodwill of the firm = 20000 * 4/1
= Rs 80000

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Retirement or Death of a partner Test - 37

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Retirement or Death of a partner Test - 37

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SHARING IS CARING

Question 1

Rs 50,000

Rs 75,000

Rs 40,000

Rs 60,000

Solution

Question 2

New profit sharing ratio.

Old profit sharing ratio.

Sacrificing ratio.

Capital ratio.

Question 3

$$Rs.4,20,000$$

$$Rs.3,11,000$$

$$Rs.1,20,000$$

$$Rs.2,20,000$$

Solution

Question 4

adjusted goodwill

premium for capital

premium for goodwill

hidden goodwill

Solution

Question 5

Goodwill = Super profit x No. of years purchase.

Goodwill = Super profit x Annuity factor.

$$Goodwill = \frac{Super \ profit}{Capitalization \ rate} \times 100$$

Any of the above.

Question 6

3:2:4

9:6:4

9:6:5

6:4:4

Solution

Question 7

$$47:25$$

$$17:11$$

$$31:11$$

$$14:21$$

Solution

Question 8

(I) & (III) only

(I) , (III) & (IV)

(I) , (II) & (III) only

All (I) to (IV)

Question 9

27:18:5

28:17:5

5:4:1

19:19:12

Solution

Question 10

Rs. 20,000

Rs. 80,000

Rs. 40,000

None of the above

Solution

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