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Retirement or Death of a partner Test - 7

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Retirement or Death of a partner Test - 7
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  • Question 1
    1 / -0

    A , B and C are the partners sharing profits in the ratio of their capital which were ₹75000, ₹50000 and ₹25000 respectively. C retired and new profit sharing ratio between A and B was 1:2. On C’s retirement the goodwill of the firm was valued at ₹30000. What amount of goodwill will be debited to B’s Account?

    Solution

    Rs.10,000 will be shown in the account of B:
    Old Ratio = 3:2:1 (Capital Ratio)
    New Ratio of A and B after the retirement of C = 1:2
    B is the only gainer i.e. New ratio - old Ratio = 2/3- 2/6 =2/6
    B will be debited with 30,000 × 2/6 = 10,000

  • Question 2
    1 / -0

    R, Y and S were partners sharing profits in the ratio of 1:2:3 their capital ` 23000, ` 30000 and ` 17000 respectively. Y retired .Capital has to be fully paid in cash and whole amount is brought in cash by R and S to make their capital thereafter equal. Calculate amount brought by S

    Solution

    Total Capital = 23,000 + 30,000 + 17,000 = Rs.70,000
    New Capital of R and S will be 70,000/2 = 35,000 each after the retirement of Y
    Old capital of S = Rs.17,000
    New Capital of S = Rs. 35,000
    S will bring = 35,000 – 17,000 = Rs.18,000

  • Question 3
    1 / -0

    R, S and T are partners sharing profit in the ratio of 7:5:4. T died on 30th June 2012.Profit for the year was ₹24000 for the year 2011-2012. How much share in profits for the death period will be credited to T’s account

    Solution

    Share of profit of T will be calculated as follows:
    Profit for the previous year = Rs.24,000
    Profit for 3 months (from the last balance sheet to the date of his death) = 24,000 × 3/12 = Rs.6,000
    T’s share of profit for 3 months = 6,000 × 4/16 = Rs. 1,500

  • Question 4
    1 / -0

    When a Partner dies, amount due to him will be paid to:

    Solution

    In case of death of a partner, amount due to him will be paid to his legal heirs or his executors. Excutors are the leagl heirs or the family/relatives.

  • Question 5
    1 / -0

    When balance is paid in installment to the executor and rate of interest is not given:

    Solution

    When amount due to the retirement is paid in instalments instead of paying it in lump sum and rate of interest on partner’s loan is not given in the question, in such a case interest will be paid at the rate of 6% p.a.

  • Question 6
    1 / -0

    A partner may wish withdrawn from a firm for various reasons like old age, on health ground, misunderstanding with other partners. Such a situation is called:

    Solution

    A partner can get retirement in the following ways:
    (1) With the consent of all the partners
    (2) Due to ill health
    (3) Agreement/contract is over
    (4) By giving notice

  • Question 7
    1 / -0

    A retired partner is not liable for the debts incurred by the firm ________ retirement

    Solution

    Once a partner retires form a partnership firm, he will not be liable for any debt of the firm or any liability due which firm is not able to meet on time as he is no longer a partner now in the firm. He is responsible for the debts and other liabilities up to the date of his retirement only.

  • Question 8
    1 / -0

    A retiring partner has the right of getting back his share in the firm’s property , so there are some problems mainly

    Solution

    A retiring partner has right for the following:
    (i) His share of capital
    (ii) His share of profit reserves and gains etc.
    (iii) Revaluation profit (if any)

    (iv) Goodwill to be taken by 

  • Question 9
    1 / -0

    There are some adjustments are to be done at the time of retiring partner

    a.New profit sharing ratio of continuing partners

    b.Accounting treatment of goodwill

    c.Preparation of Executor’s Account

    d.Adjustment of Reserves and Profits

    Which of the above adjustments are to be done

    Solution

    Following adjustments are done at the time of retirement of a partner:
    •New profit sharing ratio of continuing partners
    •Accounting treatment of goodwill
    •Adjustment of Reserves and Profits
    Note : Executor’s Account is prepared at the time of death of a partner.

  • Question 10
    1 / -0

    Name the ratio in which continuing partner will share future profits after retiring partner.

    Solution

    When a partner retires from the firm, new share for the remaining partners will be calculated as follows: New share = Old share + acquired gaining share

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