Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 53

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Weekly Quiz Competition

Question 1
1 / -0

A & B are sharing profits in the ratio of $$5:3$$. C was admitted on the following terms:
New profit sharing ratio wiill be $$7:5:3$$
Machinery would be appreciated by $$10\%$$ (book value Rs.$$1,80,000$$)
Building would be depreciated by $$6\%$$ (book value Rs.$$1,50,000$$)
To create provision for bad debts $$5\%$$ on Debtors of Rs.$$40,000$$
Find the distribution of profit/loss on revaluation between A & B

A
Profit $$4,083$$ & $$2,917$$

B
Profit $$2,625$$ & $$4,375$$

C
Profit $$2,917$$ & $$4,083$$

D
Profit $$4,375$$ & $$2,625$$
Question 2
1 / -0

The net profits of a business, after providing for income tax for the last 5 years were: Rs 80,000, Rs 1,00,000, Rs 1,20,000, Rs 1,25,000 and Rs 2,00,000 respectively. The capital employed in the business is Rs 10,00,000 and the normal rate of return is $$10\%$$. Calculate the value of the goodwill on the basis of the annuity method taking the present value of annuity of Rs 1 for 5 years at $$10\%$$ is 3.7907.

A
Rs 84,768

B
Rs 95,768

C
Rs 94,768

D
Rs 60,000
Question 3
1 / -0

If one of the partner of a partnership firm comprising 2 partners dies, then _________.

A
firm will dissolve

B
partnership profits will change, no effect on firm

C
both (A) & (B)

D
none of these

Solution

When a partnership firm ceases to exist, the partnership firm is said to be dissolved. "The dissolution of partnership between all partners of a firm is called the dissolution of the firm." There is a difference between dissolution of partnership and dissolution of firm. dissolution of partnership involves a change in a relationship of partners. When one or more partners cease to be the partners of the firm because of one or the other reason and other partner continue the partnership business, it is nothing but the dissolution of partnership and not of the firm. But if there are only two partners in a partnership and one of the partner dies, firm will dissolve as the subject matter of partnership i.e., basic requirement of partnership of having at least 2 members does not exist.
Question 4
1 / -0

Find the goodwill from the following information:
Capital employed - Rs 8,25,000
Rate of normal return - Rs. $$10\%$$
Future Maintainable profit - Rs 1,50,000
Annuity factor - Rs. 3.17

A
Rs 4,75,500

B
Rs 2,61,525

C
Rs 3,13,975

D
Rs 2,13,975
Question 5
1 / -0

Capital employed by a partnership firm is $$Rs.1,00,000$$. Its average profit is $$Rs.20,000$$. Normal rate of return is $$15\%$$. Value of goodwill is _________.

A
$$Rs.33,333$$

B
$$Rs.30,000$$

C
$$Rs.23,333$$

D
$$Rs.43,667$$

Solution

Calculation of goodwill under capitalization basis:
Capital employed = Rs. 100000
Normal rate of return = 15%
Average profit = Rs. 20000
Normal value of business = Average profit/ Normal rate of return
Normal value of business = Rs. 20000/ 15%
Normal value of business = Rs. 133333
Goodwill = Normal value of business - Capital employed
Goodwill = Rs. (133333 - 100000) = Rs. 33333
Question 6
1 / -0

Choose the correct answers from the alternatives given.
Unless otherwise agreed, a retiring partner can _______.

A
carry on competing business

B
use the firms name

C
represent himself as carrying on firms business

D
solicit the old customers

Solution

Rights of an outgoing partner to carry on competing business - An outgoing partner may carry on a business competing with that of the firm and he may advertise such business. But subject to contract to the contrary may not
1. Use the firm name,
2. Represents himself as carrying on the business of the firm,
3 Solicit the custom of persons who were dealing with the firm before he ceased to be a partner.
Question 7
1 / -0

A partnership contract was revised and due to this revision it was found that the distribution of profit amongst the partners is required to be changed after true closure of accounts. This will affect which account?

A
Commission payable account

B
Past adjustment of profit

C
Interest on capital

D
Interest on drawings
Question 8
1 / -0

The net profits after tax of Z & Co. for the past 5 years are as follows:
Year Profit
2007-2008 2,56,000
2008-2009 2,64,000
2009-2010 3,76,000
2010-2011 4,86,000
2011-2012 5,30,500
The capital employed is Rs. 16,00,000. Rate of normal return is $$15\%$$. Calculate the value of the goodwill on the basis of annuity method on super-profits basis, taking the present value of an annuity of Rs 1 for the 4 years at $$15\%$$ as 2.855

A
Rs. 7,65,000

B
Rs 8,67,800

C
Rs 5,70,000

D
Rs 4,06,838
Question 9
1 / -0

A & B are partners with capitals of $$Rs.10,000$$ and $$Rs.20,000$$ respectively and sharing profits equally. They admitted C as their third partner with 1/4th profits on the payment of $$Rs.12,000$$. The amount of hidden goodwill is ___________.

A
$$Rs.6,000$$

B
$$Rs.10,000$$

C
$$Rs.8,000$$

D
None of the above

Solution

When the value of 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. 12000 * (4/1) - Rs. (10000 + 20000 + 12000)
Goodwill = Rs. 48000 - Rs. 42000
Goodwill = Rs. 6000
Question 10
1 / -0

Find the goodwill from the following information:
Capital employed - Rs. 11,00,000
Rate of normal return - Rs. $$10\%$$
Future Maintainable profit - Rs. 2,00,000
No. of year purchases - 3 years

A
Rs. 6,00,000

B
Rs. 2,70,000

C
Rs. 9,00,000

D
Rs. 3,70,000

Solution

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Re-Attempt Weekly Quiz Competition

Year	Profit
2007-2008	2,56,000
2008-2009	2,64,000
2009-2010	3,76,000
2010-2011	4,86,000
2011-2012	5,30,500

Retirement or Death of a partner Test - 53

Result

Retirement or Death of a partner Test - 53

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SHARING IS CARING

Question 1

Profit $$4,083$$ & $$2,917$$

Profit $$2,625$$ & $$4,375$$

Profit $$2,917$$ & $$4,083$$

Profit $$4,375$$ & $$2,625$$

Question 2

Rs 84,768

Rs 95,768

Rs 94,768

Rs 60,000

Question 3

firm will dissolve

partnership profits will change, no effect on firm

both (A) & (B)

none of these

Solution

Question 4

Rs 4,75,500

Rs 2,61,525

Rs 3,13,975

Rs 2,13,975

Question 5

$$Rs.33,333$$

$$Rs.30,000$$

$$Rs.23,333$$

$$Rs.43,667$$

Solution

Question 6

carry on competing business

use the firms name

represent himself as carrying on firms business

solicit the old customers

Solution

Question 7

Commission payable account

Past adjustment of profit

Interest on capital

Interest on drawings

Question 8

Rs. 7,65,000

Rs 8,67,800

Rs 5,70,000

Rs 4,06,838

Question 9

$$Rs.6,000$$

$$Rs.10,000$$

$$Rs.8,000$$

None of the above

Solution

Question 10

Rs. 6,00,000

Rs. 2,70,000

Rs. 9,00,000

Rs. 3,70,000

Solution

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