Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 46

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Weekly Quiz Competition

Question 1
1 / -0

Under average profit basis, goodwill is calculated by:

A
No. of years purchased multiplied with past average profits

B
No. of years purchased multiplied with past super profits

C
Summation of the discounted value of expected future benefits

D
Super profit divided with expected rate of return

Solution

Under average profits method, the goodwill is valued at agreed number of 'years' purchase of the average profits of the past few years. It is based on the assumption that a new business will not be able to earn any profits during the first few years of business. Hence, goodwill is calculated by multiplying the past profits by the number of years during which the anticipated profits are expected to accrue
Question 2
1 / -0

Excess of actual profit over normal profit is called

A
Normal profit

B
Super profit

C
Capitalized profit

D
All of the above

Solution

Super profit is the excess of average profits over normal profits. It is a way of determining the extra profits that are earned by the business. It is also used in the calculation of goodwill.
Question 3
1 / -0

There are three partners P,Q and R sharing profit and loss in the ratio of 4:5:3. Q retires, and the remaining partners agreed to share profit and loss in future in the ratio of 7:8. What is the gaining ratio of the old partners?

A
8:3

B
5:4

C
7:8

D
3:5

Solution

New ratio is 7:8
Old ratio is 4:5:3
find gaining ratio is?
partner P gaining ratio=new ratio-old ratio
=7/15-4/12
=84/180-28/180=56/180
partner R gaining ratio =new ratio-old ratio
=8/15-3/12
=96/180-45/180
=51/180
gain ratio is 56/180:51/180
partner P gaining ratio=new ratio- old ratio
=7/15-4/12
=84/180-28/180=56/180
partner Q gaining ratio=new ratio-old what
=8/15-5/12
=96/180-75/180=21/180
gain ratio =56//180:21/180=
=8:3
Question 4
1 / -0

A,B and C are three partners sharing profit and loss in the ratio of 3:2:1. B retire from the firm.If B's share of profit is purchased by C. What will be new profit sharing ratio?

A
1:2

B
2:1

C
3:1

D
3:2

Solution

retire partner B=2/6
remaining ratio=3:1
A's get=2/6*3/4=6/24
A's new ratio=3/6+6/24
=12/24+6/24
=18/24
C's get=2/6*1/4=2/24
C's new ratio=1/6+2/24
=6/24
new ratio is 18/24:6/24=3:1
Question 5
1 / -0

X,Y and Z are three partners in a firm.They are sharing profit and loss in the ratio of 3:2:1.On 11th Jan Y died. The firm decided to value goodwill based on 3 years purchase of weighted average of 5 years profit.The trading profit of the firm for the past five years before charging interest on capital was as under Rs.10,000,Rs.9,000,Rs.11,000,Rs.7,000,Rs.8,000. The capital of the firm stood Rs.50,000 and interest on capital of the firm stood Rs.50,000 and interest on capital is given at 8%. What is Y's share of goodwill?

A
Rs.15,000

B
Rs.9,000

C
Rs.10,000

D
Rs.7,500

Solution

average profit =10000+9000+11000+7000+8000/5
=45000/5=9000
goodwill =9000*3=27000
Y's share of goodwill=27000*2/6=9000
Question 6
1 / -0

The amount due to the deceased partner is paid to his __________.

A
friends

B
wife

C
executor

D
father
Question 7
1 / -0

On retirement /death of a partner new Profit sharing ratio of remaining partner _________.

A
old ratio + gaining ratio.

B
old ration+ sacrificing ratio.

C
1/No. of partners.

D
old ratio - sacrificing ratio.

Solution

The share of retire partner amongst continuing partner
formula is,
gaining ratio=new ratio-old ratio
then,
new ratio=old ratio+raining ratio
Question 8
1 / -0

At the time of admission when goodwill account is not being opened in the books of account, credit is given to the old partner in what ratio?

A
Old profit sharing ratio

B
New profit sharing ratio

C
Sacrificing ratio

D
Equally

Solution

Due to admission of the partner change in the profit and loss of the old partner and the ratio which old partner are share profit to incoming partner is called sacrifice ratio.
Question 9
1 / -0

Amount due to a retiring partner is shown as _________.

A
capital a/c.

B
long term loan.

C
retiring partner loan a/c.

D
term loan a/c.

Solution

Any amount due from the retiring partner it must be shown and enter in the retiring partner loan a/c . The separate account of retiring partner is open to store record its different existing partner account.
Question 10
1 / -0

A, B and C are three partners. On death of B assets and liabilities are revalued as under, Provision for doubtful debts reduced by Rs.1050, Stock in trade decreased by Rs.550, unrecorded liability Rs.1500 taken on record Building increased by Rs.4600. Remaining partners decides to reinstate the assets and liabilities at old balances. The revaluations would be given effects by _________.

A
A a/c Dr. 250,C A/c Dr Rs.250,Credit B Rs.500

B
A a/c Dr. 250,C A/c cr Rs.250,Debit B Rs.500

C
A a/c Dr. 500,C A/c Dr Rs.500,Credit B Rs.500

D
A a/c Dr. 250,B A/c Dr Rs.250,Credit C Rs.500

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Retirement or Death of a partner Test - 46

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Retirement or Death of a partner Test - 46

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SHARING IS CARING

Question 1

No. of years purchased multiplied with past average profits

No. of years purchased multiplied with past super profits

Summation of the discounted value of expected future benefits

Super profit divided with expected rate of return

Solution

Question 2

Normal profit

Super profit

Capitalized profit

All of the above

Solution

Question 3

8:3

5:4

7:8

3:5

Solution

Question 4

1:2

2:1

3:1

3:2

Solution

Question 5

Rs.15,000

Rs.9,000

Rs.10,000

Rs.7,500

Solution

Question 6

friends

wife

executor

father

Question 7

old ratio + gaining ratio.

old ration+ sacrificing ratio.

1/No. of partners.

old ratio - sacrificing ratio.

Solution

Question 8

Old profit sharing ratio

New profit sharing ratio

Sacrificing ratio

Equally

Solution

Question 9

capital a/c.

long term loan.

retiring partner loan a/c.

term loan a/c.

Solution

Question 10

A a/c Dr. 250,C A/c Dr Rs.250,Credit B Rs.500

A a/c Dr. 250,C A/c cr Rs.250,Debit B Rs.500

A a/c Dr. 500,C A/c Dr Rs.500,Credit B Rs.500

A a/c Dr. 250,B A/c Dr Rs.250,Credit C Rs.500

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