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Dissolution of Partnership Test - 17

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Dissolution of Partnership Test - 17
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  • Question 1
    1 / -0
    X & Y entered a Joint Venture for export of Indian Handicraft items to overseas customers. X sends goods worth Rs. 2,00 000 to Y for export to USA. Y exported goods worth Rs. 1,75,000 to USA for Rs. 2,10,000 and agreed to take away the remaining goods at cost less 10%. Y's Account will be __________ for goods taken away.
    Solution
    X sends goods costing $$Rs.2,00,000$$ to Y of which good costing $$Rs.25,000$$ is not exported by Y to USA.
    This remaining good costing $$Rs.25,000$$ are agreed to be taken over by Y at a cost less 10%.
    Therefore $$Rs.25,000$$-10% of $$Rs.25,000$$= $$Rs.22,500$$
    ( Assuming 10% is on cost )
  • Question 2
    1 / -0
    All external liability accounts including provisions, if any, are closed by transferring them to the credit of _________ account.
    Solution
    The total amount of debts payable by a business to the outsiders (other than the owners) are called external liabilities. All external liability accounts including provisions, if any, are closed by transferring them to the credit of Realisation account. The journal entry for transfer of liabilities is :
    Liabilities A/c Dr.
                To Realisation A/c
  • Question 3
    1 / -0
    Who is treated as liquidator in Creditors' voluntary winding up?
    Solution
    Voluntary winding up is the process in which a company is unable to carry out it operations or the period for carrying the operations expires or if it is unable to meet its financial obligations. It can carry this process either by passing special resolution or by ordinary resolution. There are two kinds of voluntary winding up. They are;
    1. Member's voluntary winding up.
    2. Creditors voluntary winding up.
    Under creditors voluntary winding up declaration of solvency is not required because the company first only becomes unable to pay the liabilities. Under this, the copy of the resolution is sent to the registrar within 10 days. The liquidators are appointed by the members as well as the members of the company.
  • Question 4
    1 / -0
    X,Y and Z are three partners sharing profit and loss in the ratio of  3:2:1. The firm took joint life policy of Rs.30,000 for X,Rs.20,000 for Y and Rs.10,000 for Z. What is the share of Z in the Joint Life policy?
    Solution
    partner sharing ratio is=3:2:1
    total amount of Joint life policy =60000
                            Z share is =60000*1/6=100000
  • Question 5
    1 / -0
    _________ is created to provide funds for payment to the legal heir of the deceased partner.
  • Question 6
    1 / -0
    Upon dissolution, which is the proper order of application of the firm's assets?
    I . Payment of partners loan
    II. In paying the debts of the firm to third parties
    III. Distribution of surplus to partners in profit sharing ratio
    IV. Payment of partners capital

    Select the correct answer from the options given below-
  • Question 7
    1 / -0
    Dissolution of the partnership is _________ in nature, as it is dissolved by mutual agreement. Conversely, a firm is dissolved either ________________.
    Solution
    A partnership gets terminated in case of admission, retirement, death, etc. of a partner. This does not necessarily involve the dissolution of the firm. 
    The dissolution of a firm implies the discontinuance of business and cessation of economic relations between the partners.
     Under dissolution of a partnership, the court does not intervene because the partnership is dissolved by mutual agreement i.e. voluntary, while the dissolution of a firm can take place by the court's order i.e either voluntarily or compulsorily.
  • Question 8
    1 / -0
    After the dissolution of the firm, any partner or his representative may restrain any other partner or his representative from carrying of similar business in the firm's name or by using firm's property for own benefit until___.
  • Question 9
    1 / -0
    In which of the following case Garner v Murray rule is NOT applicable? 
    1. Only one partner is solvent.
    2. All partners are insolvent.
    3. When partnership deed provides a specific method to be followed in case of insolvency of a partner

    Select the correct answer from the options given below-
    Solution

    According to Garner vs. Murray rule, if the partner becomes insolvent, he is unable to pay back the amount due to him. The amount not paid is a capital loss which should be borne by the solvent partner in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm. This rule is applicable when one partner is insolvent then other partner can bring the cash. But if only one partner is solvent or all partners are insolvent then there is no one to bring the cash, so this rule can not be applied. And if partnership  deed provides a method to follow then that method will be followed only.

  • Question 10
    1 / -0
    The amount due to the retiring partner can be made by ________.
    Solution
    Business of a partnership firm may not come to an end due to the death of a partner. Other partners may shall continue to run the business of the firm. Readjustments takes place in case of death of a partner likewise the case of retirement of a partner. Whenever, a partner dies the continuing partners make gain in terms of profit sharing ratio. Therefore, the remaining partners arrange for the amount to b paid to discharge the claim of deceased partners. Assets and liabilities are revalued, value of goodwill is raised and surrender value of joint life policy, if any, is taken into account. Revaluation of profit and reserves are transferred to capital or current accounts of partners. Lastly, final amount due to the retiring partner is determined and discharged. 

    There are two ways in which amount due to deceased partner is discharged:
    1. Lump sum payment method - In this, if the firm has sufficient cash to pay off the amount due to the deceased partner, it pay the amount immediately, this is known as lump sum payment method.
    2. Installment payment method - In this, if the firm  does not have sufficient cash to pay off the amount due to deceased partner, it pay the amount in installments, this is known as installment payment method.
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