Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 57

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Weekly Quiz Competition

Question 1
1 / -0

__________ method in which the profits up to the date of death for the current year are calculated on the basis of current year's sales up to the date of death by using the formula

A
Time basis

B
Sale basis

C
Average profit

D
Both Sale basis and Time basis

Solution

The method in which the profits up to the date of death for the current year are calculated on the basis of current year's sales up to the date of death by using the formula is called sale basis method or profit on turnover.

The Formula to calculate profit from starting or year to date of death will be:- Last year profit/Last year sale * Current year sale till date of death

or Current year sale * % of profit margin over last year

or as provided by the question.
Question 2
1 / -0

Goodwill Given in the old Balance Sheet will be:

A
Written off by the old partners

B
Distributed by Gainer partners

C
Written off by the Sacrificing partners

D
Credited to old Partners Capital accounts

Solution

Goodwill given in the old balance sheet will be written off by all the partners (including retiring partner) at the time of retirement of a partner. Goodwill will be written off in the old ratio of all the partners.

As it is fictitious assets so we write it on debit side of partners capital account and reduce partners capital with that effect. So asset goddiwll gone and liabilities capital reduce. debit =credit.
Question 3
1 / -0

Except outgoing partner, which other partner can be credited at the time of settlement of goodwill amount?

A
Partner who has no gain or sacrifice

B
Gainer partner

C
Sacrificing partner

D
All the partners

Solution

If any partner sacrificing instead of gaining at the time of retirement or death, in such a case that partner’s capital account should be credited for the adjustment of goodwill amount.
Question 4
1 / -0

New Ratio – Old Ratio = ?

A
Gain Ratio

B
New ratio of continuing partners

C
Sacrificing ratio

D
Both Sacrificing ratio and New ratio of continuing partners

Solution

At the time of retirement or death of a partner, gain ratio of remaining partners is calculated as follows:

New Ratio – Old Ratio = Gain Ratio
Question 5
1 / -0

Why is outgoing partner entitled to a share of goodwill of the firm

A
Goodwill earned by the firm is the effort of all the partners

B
Goodwill earned by the firm is the effort of only one the partners

C
Goodwill earned by the firm is the effort of new partners

D
Goodwill earned by the firm is the effort of retired partners

Solution

Goodwill earned by the firm is the effort of all the partners. When a partner retires from the firm, he should get his share of goodwill other than his capital amount (adjusted).
Question 6
1 / -0

L, M and N are partners sharing profit and losses in the ratio of 25:15:9 . M retires. It is decided that the profit sharing ratio between remaining partner will be the same as existing between M and N after the retirement of L. Calculate Gaining ratio

A
40:75

B
45:75

C
45:80

D
55:75

Solution

Old Share 25 : 15 : 9

L’s share = 25/29

Gain Ratio = 45: 75
Question 7
1 / -0

Which of the following item is not shown in the credit side of deceased partner’s capital account?

A
Share of reserve

B
Share of loss

C
Revaluation profit

D
Share of profit

Solution

Share of loss is not shown in the credit side it is shown in the debit side of deceased partner’s capital account. Following items are shown in the credit side of his account:

•Share of profit

•Revaluation profit

•Share of reserve
Question 8
1 / -0

Amount due to a deceased partner shown by his Capital Account is transferred to ____ account

A
Continuing Partners Account

B
Retired Partners Account

C
His Executor’s Account

D
All partners Account

Solution

Amount due to deceased partner i.e. his capital balance, share of reserve, share of profit, revaluation profit or loss etc. will be adjusted in deceased partner’s capital account, and same will be handed over to the executor of deceased partner.
Question 9
1 / -0

How will you transfer the due amount to the loan account of retiring partner?

A

Bank A/c Dr.
To Retiring partner’s loan A/c

B

Retiring Partner’s capital A/c Dr.
To Retiring partner’s loan A/c

C

Gainer partners A/c Dr.
To Retiring partner’s loan A/c

D

Retiring Partner’s capital A/c Dr.
To Bank A/c

Solution

Following journal entry will recorded for the amount transferred to retiring partner’s loan account:

Retiring Partner’s capital A/c Dr.
To Retiring partner’s loan A/c
Question 10
1 / -0

Partner’s Capital Account will be debited in case of ____________

A
Profit on Revaluation

B
General Reserve

C
Both Profit on Revaluation and General Reserve

D
Loss on Revaluation

Solution

Partner’s capital account will be debited in case of loss on revaluation and in other cases his account will be credited i.e.

•Profit on Revaluation

•General Reserve

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Retirement or Death of a partner Test - 57

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Retirement or Death of a partner Test - 57

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SHARING IS CARING

Question 1

Time basis

Sale basis

Average profit

Both Sale basis and Time basis

Solution

Question 2

Written off by the old partners

Distributed by Gainer partners

Written off by the Sacrificing partners

Credited to old Partners Capital accounts

Solution

Question 3

Partner who has no gain or sacrifice

Gainer partner

Sacrificing partner

All the partners

Solution

Question 4

Gain Ratio

New ratio of continuing partners

Sacrificing ratio

Both Sacrificing ratio and New ratio of continuing partners

Solution

Question 5

Goodwill earned by the firm is the effort of all the partners

Goodwill earned by the firm is the effort of only one the partners

Goodwill earned by the firm is the effort of new partners

Goodwill earned by the firm is the effort of retired partners

Solution

Question 6

40:75

45:75

45:80

55:75

Solution

Question 7

Share of reserve

Share of loss

Revaluation profit

Share of profit

Solution

Question 8

Continuing Partners Account

Retired Partners Account

His Executor’s Account

All partners Account

Solution

Question 9

Bank A/c Dr. To Retiring partner’s loan A/c

Retiring Partner’s capital A/c Dr. To Retiring partner’s loan A/c

Gainer partners A/c Dr. To Retiring partner’s loan A/c

Retiring Partner’s capital A/c Dr. To Bank A/c

Solution

Question 10

Profit on Revaluation

General Reserve

Both Profit on Revaluation and General Reserve

Loss on Revaluation

Solution

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Bank A/c Dr.
To Retiring partner’s loan A/c

Retiring Partner’s capital A/c Dr.
To Retiring partner’s loan A/c

Gainer partners A/c Dr.
To Retiring partner’s loan A/c

Retiring Partner’s capital A/c Dr.
To Bank A/c