Admission of a Partner Test

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Admission of a Partner Test - 5

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Question 1
1 / -0

When a new partner is admitted he acquires his share of profits from the old partners , this will ____ the old partner’s shares in profits:

A
Increase

B
Remain same

C
Reduce

D
No change

Solution

Old partners will sacrifice some share in favor of a new partner. In simple words, when a new partner is admitted he acquires his share of profits , this will reduce the old partner’s shares in profits.
Question 2
1 / -0

__________ means good name, good reputation earned by a firm through the hard work and honesty of its owners

A
Low Average profit

B
Revaluation Profit

C
Goodwill

D
Negative Super Profit

Solution

Goodwill means good name, good reputation earned by a firm through the hard work and honesty of its owners.
Question 3
1 / -0

A and B are partners sharing profits in the ratio of 3:2. They admitted C as a new partner for 1/5 share in the future profits of the firm. Calculate new profit sharing ratio of A, B and C

A
10:7:4

B
12:10:4

C
12:8:5

D
14:10:6

Solution

Calculation of new ratio of partners:
Old Ratio = 3:2
C is admitted for 1/5th share
Remaining share : 1 – 1/5 = 4/5
A’s new share = 3/5 × 4/5 = 12/25
B’s new share = 2/5 × 4/5 = 8/25
C’s Share 1/5 OR 5/25
New Ratio 12 : 8: 5
Question 4
1 / -0

Which of the following is not an example of Reconstitution of partnership firm?

A
Change in Existing profit sharing ratio

B
Admission of a new partner

C
Retirement/Death of a partner

D
Purchase of Assets for the business

Solution

Reconstitution on a partnership means change in the number of partners through Admission, Retirement or Death of the partners or change in the ratio of partners. Puchase of Assets will not change the constitution of the partnership.
Question 5
1 / -0

Why new profit ratio is determined even for old partners?

A
Ratio keeps on changing in every six month

B
Change in the agreement among all partners

C
Due to change in external environment

D
No change in agreement

Solution

When a new partner is admitted the old partners sacrifice their share of profits and hence there will be a change in their old ratios. So new profit sharing ratio should be calculated for all the old partners.
Question 6
1 / -0

If new partner is unable to bring in his share of goodwill , How will you deal

A
New Partner’s A/c Dr
  To Gainer Partner’s Capital A/c

B
New Partner’s Capital A/C OR Current A/C Dr.
  To Sacrificing Partner’s Capital / current A/c

C
New Partner’s A/c Dr.
  To Old Partner’s Capital A/c

D
New Partner’s A/c Dr.
  To All Partner’s Capital A/c

Solution

New partner’s CAPTIAL A/C SHOULD BE DEBITED OR(current account should be debited IN CASE OF FIXED CAPITAL METHOD) if he is unable to bring his share of premium for goodwill in cash.
Question 7
1 / -0

Is admission of a new partner a reconstitution of partnership firm:

A
It is dissolution of firm

B
No

C
It is called merger

D
Yes

Solution

Admission of a new partner will reconstitute the partnership firm. It means it is the end of old partnership and beginning of a new partnership among the partners. It does not mean the end of the firm.
Question 8
1 / -0

Ram, Ramesh and Rajesh are partners in a business sharing profits and losses in the ratio 3:2:1. Rajesh retires and both the existing partners agree to share profits in the ratio 2:1 .Later Rajesh requests the other partners that his physically challenged son should be inducted as a partner in his place. After discussing it amongst themselves both the partners, Ram and Ramesh agree to take his son as a partner. Identify the values which should have been incorporated while formulating partnership

A
Righteous behavior

B
Respect for humanity

C
Respect for law

D
Both Respect for humanity and Righteous behavior

Solution

This is the moral duty of Ram and Ramesh to admit Rajesh’s son into the partnership firm. It shows faith and trust amongst the partners for each other. By admitting Rajesh’s son they have shown righteous behavior and respect for the humanity
Question 9
1 / -0

The amount of goodwill brought in by the new partner is shared by the ____ partners in their ____ ratio

A
Gaining partner, gaining

B
All partners (including new) in new ratio

C
Sacrificing partners, sacrificing

D
All old partners in old ratio

Solution

The amount of premium for goodwill brought in by the new partner will be shared ONLY by the sacrificing partners in their sacrificing ratio.
Question 10
1 / -0

DK and SK are partners sharing profits in the ratio of 4:1. They admit PK as a new partner for 1/4th share in future profits, which he wholly acquired form DK. Find out new ratio.

A
11:4:7

B
11:4:5

C
11:5:2

D
11:3:5

Solution

Calculation of new ratio:
PK’s share = 1/4
DK’s new share will be = 4/5 – 1/4 = 11/20
SK’s new share = 1/5
New profit sharing ratio = 11:4:5
Question 11
1 / -0

Incoming partner may acquire his share from the old partners
(i) In their old profit sharing ratio
(ii) In a particular ratio
(iii) In particular fraction from some of the partners
In which of the above mentioned alternatives

A
Only i

B
Only i and ii

C
Only I and iii

D
All the three

Solution

A newly admitted partner may acquire his share of profit from one partner or two partners or from all partners in an agreed ratio. He may acquire his share in old ratio of the partners or in an agreed ratio for sacrifice.
Question 12
1 / -0

A & B are partners sharing profits in the ratio 1:1. C wants to join their firm as it enjoys a good reputation in the industry. A and B were initially reluctant to his admission but agreed to admit him for 1/5th share in profits. For this, they ask him to pay an unreasonable amount of goodwill in cash irrespective of his share in the profits. Otherwise he will not be admitted as a partner. What values are being overlooked by the firm at the time of C’s admission?

A
Dishonesty

B
Social responsibility

C
Respect for Professional ethics

D
Greediness

Solution

When a new partner is admitted into a partnership firm, he has to bring some amount (other than capital) as premium for goodwill. But old partners may exempt this amount and they may allow him to join without paying premium for goodwill. In this case C will bring his amount of goodwill but old partners have should have shown some respect towards profession.
Question 13
1 / -0

Ram and Shyam are partners in a firm sharing profits in the ratio of 3:2. They admit Ghanshyam as a partner. Ram Surrendered 1/4th of his share and Shyam 1/3rd of his share in favor of Ghanshyam. Find out the new ratio.

A
3:2:1

B
27:17:15

C
25:20:15

D
27:16:17

Solution

Calculation of new ratio:
Ram’s old Share 3/5 and Shyam’s old share 2/5
Share surrendered by Ram = 1/4th of 3/5 = 3/20
Ram’s new share = 3/5 -3/20 = 9/20
Share Surrender by Shyam = 1/3 of 2/5 = 2/15
Shyam’s new share = 2/5 – 2/15 = 4/15
New Ratio : 27:16:17
Question 14
1 / -0

With the ___ into the firm number of partner increase

A
Retirement of new partner

B
Dissolution of a new partner

C
Death of new partner

D
Admission of a new partner

Solution

Number of partners in a firm will increase when a new partner is admitted i.e. old partners + new partner.
Question 15
1 / -0

Kamal and Rahul are partner’s in a firm sharing profits and losses in the ratio of 7:3.They admit Kaushal as a prtaner for 1/5th share.Kaushal acquires his share from Kamal and Rahul in the ratio of 3:2 . The goodwill of the firm has been valued at Rs.25000. Kaushal paid Rs.10000 privately to X and Y as his share of goodwill. What should be the journal entry

A
Rahul A/c Dr.
Kamal A/c Dr.
  To Kaushal A/c

B
Kamal A/c Dr.
Cash A/c Dr.
  To Goodwill A/c

C
Rahul A/c Dr.
Loan A/c Dr.
  To Cash A/c

D
No entry will be passed

Solution

No need to pass any journal entry when a new partner pays his premium for goodwill amount privately to the sacrificing partners, it will not be recorded in the books of accounts.
Question 16
1 / -0

What adjustments are mainly done at the time of admission of a new partner?
(i) Adjustment in Profit sharing ratio
(ii) Goodwill
(iii) Accumulated profits, Reserves and losses

A
Only (i) and (ii)

B
All (i), (ii) and (iii)

C
Only (ii)

D
Only (i)

Solution

Adjustments to be done at the time of admission of a partner are:
1.Change in profit sharing ratio
2.Adjustment for premium for goodwill
3.Adjustment of old goodwill (given in balance sheet)
4.Revaluation account (revaluation of assets and re-assessment of liabilities)
5.Accumulated profits and reserves
6.Adjustment of capital
Question 17
1 / -0

Sacrificing ratio is calculated for :

A
It is related to all partners

B
It is related to all partners (including new)

C
The old partners

D
It is related to new partners

Solution

When the new partner is admitted he gets his share of profits from the old partners. In other words the old partners sacrifice a part of their share to admit the new partner. Hence the sacrificing ratio is calculated for the old partners. Sacrificing ratio = Old ratio - New ratio.(of the old partners)
Question 18
1 / -0

Hari and Mohan are partners in the ratio 3:2. On 1st April, 2015 they admitted John as a new partner with 1/6 share in profit of the firm. Find out the sacrifice or gain of Mohan.

A
Mohan’s Sacrifice 2/30

B
Mohan’s Gain 2/5

C
Mohan’s Sacrifice 1/5

D
Mohan’s Gain 1/5

Solution

Calculation of Mohan’s Sacrifice/gain:
Old Ratio = 3:2
New Ratio = 3:2:1
Sacrificing Ratio = 3:2
Sacrifice of Hari = 3/5 – 3/6 = 3/30
Mohan = 2/5 – 2/6 = 2/30
Question 19
1 / -0

Anand and Nitin are partners sharing profits in the ratio of 3:2. They admitted Jayshree as a new partner for 3/10 share which she acquired 2/10 from Anand and 1/10 from Nitin. Calculate the new profit sharing ratio of Anand, Nitin and Jay

A
2:1:1

B
3:2:2

C
4:3:3

D
1:2:2

Solution

Jayshree’s share = 3/10
Anand’s share = 3/5 – 2/10 = 4/10
Nitin’s share = 2/5 – 1/10 = 3/10
New profit sharing ratio = 4:3:3
Question 20
1 / -0

WHEN the value of goodwill is not given at the time of admission of a new partner, it IS inferred from the capital OF THE NEW FIRM and profit sharing ratio. This concept is called

A
Premium for Goodwill

B
Purchased Goodwill

C
Hidden Goodwill

D
Average Goodwill

Solution

It is known as hidden goodwill. Following formula should be used to calculate the value of hidden goodwill: Total Capital of the NEW firm – Combined capital of ALL partners = Hidden Goodwill
Question 21
1 / -0

L and M are partners in a firm profit sharing ratio are 7:3. N and is admitted as a new partner for 3/7th share which he acquires 2/7th from L and 1/7th from M. N brings in ₹ 40000 as capital and ₹15000 as his share of goodwill. How much amount will be credited to L:

A
₹25000

B
₹15000

C
₹20000

D
₹10000

Solution

Calculation of amount to be credited to L:
Old Ratio : 7:3
New Ratio = 29:11:30
Sacrificing Ratio = 2:1
Premium for goodwill = 15,000
L’s share = 15,000 × 2/3 = 10,000
Question 22
1 / -0

Why new partner needs to bring goodwill?

A
To compensate the sacrificing partners

B
For Revaluation Account

C
To compensate the old partners for their gain share

D
Both To compensate to the sacrificing partners and To compensate the old partners for their gain share

Solution

A new partner (at the time of his admission) will bring some extra amount with capital which is known as premium for goodwill. This amount will be given to the sacrificing partners for their sacrifice in favor of him.
Question 23
1 / -0

Z is a new partner and acquires his1/5th share of profit from X, an existing partner and present value of firm’s goodwill is Rs. 50,000. In this case Z is required to pay to X.

A
₹10000

B
₹2000

C
₹5000

D
₹25000

Solution

Calculation of the amount to be compensated to X for his sacrifice:
Goodwill of the firm = 50,000
Share acquired by Z = 1/5
Share to be compensated to X = 50,000 × 1/5 = 10,000
Question 24
1 / -0

X and Y are partners sharing profits in the ratio of 3:2. Z is admitted for 1/5 share. All partners have decided to share future profits equally. The profit of new partnership firm was Rs.30,000. This profit will be shared by all the partners in _______

A
New Ratio

B
Sacrificing Ratio

C
Gaining Ratio

D
Old Ratio

Solution

Distribution of profit is to be done in new profit sharing ratio:
X = 30,000 × 1/3 = 10,000
Y = 30,000 × 1/3 = 10,000
Z = 30,000 × 1/3 = 10,000
Question 25
1 / -0

Which of the following situation is not acceptable for the continuity of the partnership firm?

A
Death and Admission

B
Retirement and Admission on the same day

C
All partners leave the firm together

D
Admission of two partners on the same day

Solution

If All partners leave a it means the partnership is dissolved. Partnership cannot be continued if all the partners leave the firm. For continuation of a firm atleast 2 partners is required.

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Re-Attempt Weekly Quiz Competition

Admission of a Partner Test - 5

Result

Admission of a Partner Test - 5

Score

-

Rank

-

SHARING IS CARING

Question 1

Increase

Remain same

Reduce

No change

Solution

Question 2

Low Average profit

Revaluation Profit

Goodwill

Negative Super Profit

Solution

Question 3

10:7:4

12:10:4

12:8:5

14:10:6

Solution

Question 4

Change in Existing profit sharing ratio

Admission of a new partner

Retirement/Death of a partner

Purchase of Assets for the business

Solution

Question 5

Ratio keeps on changing in every six month

Change in the agreement among all partners

Due to change in external environment

No change in agreement

Solution

Question 6

New Partner’s A/c Dr To Gainer Partner’s Capital A/c

New Partner’s Capital A/C OR Current A/C Dr. To Sacrificing Partner’s Capital / current A/c

New Partner’s A/c Dr. To Old Partner’s Capital A/c

New Partner’s A/c Dr. To All Partner’s Capital A/c

Solution

Question 7

It is dissolution of firm

No

It is called merger

Yes

Solution

Question 8

Righteous behavior

Respect for humanity

Respect for law

Both Respect for humanity and Righteous behavior

Solution

Question 9

Gaining partner, gaining

All partners (including new) in new ratio

Sacrificing partners, sacrificing

All old partners in old ratio

Solution

Question 10

11:4:7

11:4:5

11:5:2

11:3:5

Solution

Question 11

Only i

Only i and ii

Only I and iii

All the three

Solution

Question 12

Dishonesty

Social responsibility

Respect for Professional ethics

Greediness

Solution

New Partner’s A/c Dr
To Gainer Partner’s Capital A/c

New Partner’s Capital A/C OR Current A/C Dr.
To Sacrificing Partner’s Capital / current A/c

New Partner’s A/c Dr.
To Old Partner’s Capital A/c

New Partner’s A/c Dr.
To All Partner’s Capital A/c

Rahul A/c Dr.
Kamal A/c Dr.
To Kaushal A/c

Kamal A/c Dr.
Cash A/c Dr.
To Goodwill A/c

Rahul A/c Dr.
Loan A/c Dr.
To Cash A/c