Admission of a Partner Test

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Admission of a Partner Test - 6

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Weekly Quiz Competition

Question 1
1 / -0

Hem and Nem are partners in a firm sharing profits in the ratio of 3:2. Their capitals were ₹80,000 and ₹50,000 respectively. They admitted Sam on Jan. 1, 2007 as a new partner for 1/5 share in the future profits. Sam brought ₹60,000 as his capital. With what amount Nem’s capital account will be credited?

A
66,000

B
8,800

C
13,200

D
22,000

Solution

Calculation of Nem’s account for goodwill (to be credited his account):
Total capital of new firm = 5 × Rs.60,000 = Rs. 3,00,000
Combined capital = Hem’s+Nem’s+Sam’s = Rs.80,000 + Rs. 50,000 + Rs.60,000 = Rs.1,90,000
Goodwill of the firm = Rs.1,10,000 (Rs. 3,00,000 – Rs.1,90,000)
Sam’s share = 1,10,000 × 1/5 = Rs. 22,000
Nem’s account to be credited with = 22,000 × 2/5 (sacrificing ratio) = 8,800
Question 2
1 / -0

Deferred revenue expenditure given in the Asset side of Balance sheet will be :

A
Credited to all partners

B
Debited to sacrificing partners

C
Debited to old partners

D
Rs.5500

Solution

At the time of admission of a new partner all deferred revenue expenditures given in the old balance sheet will be debited to all the old partners (existing partners) in their capital/current accounts, in their old profit sharing ratio.
Question 3
1 / -0

A, B and C are partners sharing profits in the ratio of 3:2:1. They admit D for 1/6 share. C would retain his old share. Calculate new ratio of all partners.

A
10 : 8 : 5 : 5

B
12 : 8 : 5 : 5

C
9 : 8 : 5 : 6

D
9 : 8 : 5 : 5

Solution

Calculation of new ratio:
Let the profit be = 1
Share of C and D = 1/6 + 1/6 = 1/3
Remaining share after paying C and D = 1 – 1/3 = 2/3
A's New Share = 3/5 × 2/3 = 6/15
B's New Share = 2/5 × 2/3 = 4/15 New Ratio = 6/15 : 4/15 : 1/6 : 1/6 or 12 : 8 : 5 : 5
Question 4
1 / -0

A, B and C are partners sharing profits in the ratio of 3:2:1. They admit D for 1/6 share. C would retain his old share. Calculate C’s sacrifice

A
1/12

B
1/10

C
1/15

D
NIL

Solution

Calculation of C’s Sacrifice:
Old Share = 3:2:1
New Share = 12 : 8 : 5 : 5
C’s Sacrifice = 1/6 – 5/30 = Nil
Question 5
1 / -0

Vivek and Vishal are partner with capital of ₹26000 and ₹22000 respectively. They admit David as partner for 1/4th share in the profits of the firm. David bring ₹30,000 (including 4,000 premium for goodwill) as his share of capital and premium. Journal entry for capital amount brought by new partner

A

Bank A/c    Dr. 22000
   To Goodwill A/c   22000

B

Bank A/c Dr. 34000
  To Vivek Capital A/c 34000

C

Bank A/c   Dr. 26000
  To David’s Capital A/c 26000

D

Bank A/c Dr. 30000
  To David’s Capital A/c 30000

Solution

Total amount brought by David is ₹30,000. But this amount includes Rs.4,000 as premium for goodwill. Hence, his actual amount of capital is ₹26,000 i.e. 30,000 – 4,000.
Question 6
1 / -0

The existing goodwill if appearing in the firm is __________ by debiting the old partner’s account.

A
Decrease

B
Written off

C
Credited

D
Increase

Solution

Goodwill given in the existing balance sheet (old balance sheet) at the time of admission of a new partner will be debited to the old partners in their old profit sharing ratio. It is also known as goodwill written off.
Question 7
1 / -0

Anu and Ram were partners in a firm sharing profits and losses in the ratio of 7:3. They admitted Chander as a new partner. The new profit sharing ratio between Anu, Ram and Chander will be 2:2:1.Chander brought Rs. 24,000 for his share of his goodwill. Who is the gaining partner in the above transaction?

A
Ram

B
Anu

C
Both Ram and Anu

D
Anu and Chander

Solution

Calculation of a gainer partner:
Old Ratio = 7:3
New Ratio = 2:2:1
Anu’s Sacrifice = 7/10 – 2/5 = 3/10
Ram’s Gain = 3/10 – 2/5 = 1/10 Gain
Question 8
1 / -0

In case of undistributed accumulated losses whose account should be debited

A
Old partner’s Capital A/c

B
Goodwill A/c

C
New partner’s A/c

D
Gaining Partner’s A/c

Solution

At the time of admission of a new partner, all accumulated profits and losses should be distributed among the old partners in their old profit sharing ratio. Accumulated losses given in the assets side of the balance sheet should also be written off to he old partners in the old ratio. Hence the old partners capital accounts are to be debited to write off the accumulated losses in the balance sheet.
Question 9
1 / -0

A and B are partners in a firm sharing profits and losses in the ratio of 3:2 They admit a new partner C. A surrenders 1/5 of his share and B 2/5 of his share in favor of C. For purpose of C’s admission, goodwill of the firm is valued at ₹75,000 and C brings his share of goodwill in cash which is retained in the firm’s books. Calculate sacrificing ratio of A and B

A
3:4

B
2:1

C
4:3

D
7:3

Solution

Calculation of sacrificing ratio:
Old Share = 3:5
A’s Sacrifice = 3/5 × 1/5 = 3/25
B’s Sacrifice = 2/5 × 2/5 = 4/25
Sacrificing Ratio = 3:4
Question 10
1 / -0

A and B are partners in a firm sharing profits and losses in the ratio 1:2.They admitted C into the partnership and decided to give him 1/3rd share of the future profits. Find the new ratio of the partners.

A
4:2:3

B
2:4:3

C
3:2:1

D
3:4:2

Solution

Calculation of new profit sharing ratio:
Old Ratio = 1:2
C’s share = 1/3
Remaining profit = 1 – 1/3 = 2/3
A’s new share = 1/3 × 2/3 = 2/9
B’s new share = 2/3 × 2/3 = 4/9
New Ratio = 2 : 4 : 3
Question 11
1 / -0

Neeta and Sumita are partners sharing profits and losses in the sates 2:1. They admit Geeta as a partner for 1/4th Share. Geeta pays ₹50, 000 as cash for capital but does not bring any amount for goodwill. The goodwill of the new firm is valued at ₹36,000. Give journal entry.

A

Cash/Bank A/c Dr. 30000
To Geeta's Capital A/c 50000

B

Cash a/c Dr. 50000
To Geeta's Capital a/c 50000

C

Cash/Bank A/c Dr. 20000
To Geeta's Capital A/c 50000

D

Cash/Bank A/c Dr. 5000
To Geeta's Capital A/c 5000

Solution

Journal entry for the amount brought by new partner as his capital:

Cash/Bank A/c Dr. 50000
To Geeta's Capital A/c 50000

Since Geetha does not bring any amount for goodwill, her capital account is debited with her share of goodwill and old partners are credited with the share in sacrificing ratio.
Question 12
1 / -0

Anu and Babita are partners in a firm sharing profits and losses in the ratio of 3:2. On April 1, 2003 they admit Deepak as a new partner for 3/13 share in the profits. Deepak contributed the following assets towards his capital and for his share of goodwill: Land ₹90,000, machinery ₹70,000, stock ₹60,000 and debtors ₹40,000. On the date of admission of Deepak, the goodwill of the firm was valued at ₹5,20,000, which is not appear in the books. Calculate amount of goodwill brought in by new partner

A
₹110000

B
₹120000

C
₹115000

D
₹100000

Solution

Calculation of goodwill amount brought by new partner:
Total goodwill of the firm Rs.5,20,000
Deepak will bring = 5,20,000 × 3/13 = 1,20,000
Question 13
1 / -0

Ashok and Ravi were partners in a firm sharing profits and losses in the ratio of 7:3. They admitted Chander as a new partner. The new profit ratio between Ashok, Ravi and Chander will be 2:2:1.Chander brought Rs.24,000 for his share of his goodwill. Calculate the amount Ravi compensate to the Ashok share in the above transaction

A
10000

B
36000

C
12000

D
24000

Solution

Calculation of amount to be compensated:
Old Ratio = 7:3
New Ratio = 2:2:1
Ashok’s Sacrifice = 7/10 – 2/5 = 3/10
Ravi’s Gain = 3/10 – 2/5 = 1/10 Gain
Ravi will compensate = 24,000 × 5/1 = 1,20,000 × 1/10 = 12,000
Question 14
1 / -0

What treatment should be given to Employee’s provident Fund appearing in the liabilities side of the Balance Sheet in case of admission of a partner

A
Should be distributed as a part of reserve

B
Should be distributed in equal ratio

C
Both treatment can be done

D
Not to be distributed

Solution

Employee provident fund is not a free reserve.It is not an accumulated profit. Partners cannot distribute it among themselves. This is outsiders’ liability which has to be paid to the employees after sometime. It will be shown in the new balance sheet of the firm (if not paid).
Question 15
1 / -0

Ram is admitted as a partner on M/s Iron and Steel Co. a partnership firm of Naman and Manik. The firm has reserve of `50000 and accumulated profit of 100000. At the time of admission Arpit an accountant distributed the reserve and accumulated profit in their profit sharing ratio. Naman was of the opinion that reserve and profit should not be distributed because even if they do not distribute reserve and profit, they will remain in business and can be distributed when partners retire or firm is dissolved. Do you agree with Naman give reason?

A
Yes , it puts Naman and Manik to advantage

B
No, it puts Ram to disadvantage

C
Yes , it puts Naman and Manik to advantage

D
No, it puts Naman and Manik to disadvantage

Solution

It is always better to distribute all the accumulated profits and reserves at the time of admission of a new partner. All accumulated profits and reserves belong to the old partners only, to avoid the future disputes, it is better to distribute all the profits and reserves (by old partners) otherwise it will be a disadvantage for them.
Question 16
1 / -0

If partners capitals are fixed, premium for goodwill will be:

A
Credited to the Partners’ Capital A/cs

B
Credited to the P/L A/c

C
Credited to the P/L Adjustment A/c

D
Credited to the current A/cs of the Sacrificing partners

Solution

When capitals of the partners are fixed, in such a case current account should be opened to record all the transactions related to premium for goodwill, revaluation profit/loss, distribution of reserves and accumulated profits etc.
Question 17
1 / -0

A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into partnership for 1/5 share. C brings ₹30,000 as capital and ₹10,000 as goodwill. At the time of admission of C, goodwill appears in the balance sheet of A and B at ₹3,000. New profit sharing ratio of partners shall be 5:3:2. What will be the entry for existing goodwill written off?

A
A's capital A/c Dr. 1700
B's capital A/c Dr. 1300
  To Goodwill 3000

B
A's capital A/c Dr. 1500
C's capital A/c Dr. 1500
  To Goodwill 3000

C
A's capital A/c Dr. 1800
B's capital A/c Dr. 1200
  To Goodwill 3000

D
A's capital A/c Dr. 1500
B's capital A/c Dr. 1500
  To Goodwill 3000

Solution

At the time of admission of a new partner old goodwill given in the balance sheet will be written off by the old partners in their old profit sharing ratio. A = 3,000 × 3/5 = 1,800 B = 3,000 × 2/5 = 1,200
Question 18
1 / -0

N and S are partners sharing profits and losses in the sates 2:1. They admit G as a partner for 1/4th Share. G pays ₹50,000 as capital but does not bring any amount for goodwill. The goodwill of the new firm is valued at ₹36,000. Calculate the amount to be credited to N for his sacrifice in the form of premium for goodwill.

A
₹5000

B
₹6000

C
₹3000

D
₹2000

Solution

Calculation of the amount to be credited to N:
Old Ratio = 2:1
New Ratio = 2:1:1
Sacrifice Share of N = 2/3 – 2/4 = 2/12 and Sacrifice Share of S = 1/3 – 1/4 = 1/12
Sacrificing Ratio = 2:1
G’s share in goodwill = 36,000 × 1/4 = 9,000; N’s share = 9,000 × 2/3 = 6,000
Question 19
1 / -0

A and B are partners in a firm sharing profits and losses in the ratio of 3:2 A new partner C is admitted. A surrenders 1/5 of his share and B 2/5 of his share in favor of C. For purpose of C’s admission, goodwill of the firm is valued at Rs.75,000 and C brings his share of goodwill in cash which is retained in the firm’s books. Journalize the above transactions. When goodwill brought by C

A

Bank A/c Dr. 21000
To Premium for Goodwill A/c 21000

B

Bank A/c Dr. 75000
To Cash A/c 75000

C

Bank A/c Dr. 2100
To Goodwill A/c 2100

D
No Journal Entry in this case

Solution

Calculation of Premium for goodwill:

Old Share = 3:5

A’s share = 3/5 × 1/5 = 3/25 Now 3/5 – 3/25 = 12/25

B’s share = 2/5 × 2/5 = 4/25 Now 2/5 – 4/25 = 6/25

C’s share = 3/25 + 4/25 = 7/25

New Ratio = 12:6:7

C’s will bring premium for goodwill = 75,000 × 7/25 = 21,000
Question 20
1 / -0

X and Y are partners sharing profits in the ratio of 5:3. Z is admitted for 1/6 share. All partners have decided to share future profits equally. At the time of admission of Z, balance sheet shows balance of profit and loss account ₹16,000. This profit will be shared by ____ partners in _____ ratio.

A
Old partners in new ratio

B
Old partners in old ratio

C
Old partners in sacrificing ratio

D
All partners in new ratio

Solution

This profit will be shared by the old partners only in their old profit sharing ratio.
X = 16,000 × 5/8 = 10,000
Y = 16,000 × 3/8 = 6,000

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Re-Attempt Weekly Quiz Competition

Admission of a Partner Test - 6

Result

Admission of a Partner Test - 6

Score

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SHARING IS CARING

Question 1

66,000

8,800

13,200

22,000

Solution

Question 2

Credited to all partners

Debited to sacrificing partners

Debited to old partners

Rs.5500

Solution

Question 3

10 : 8 : 5 : 5

12 : 8 : 5 : 5

9 : 8 : 5 : 6

9 : 8 : 5 : 5

Solution

Question 4

1/12

1/10

1/15

NIL

Solution

Question 5

Bank A/c Dr. 22000 To Goodwill A/c 22000

Bank A/c Dr. 34000 To Vivek Capital A/c 34000

Bank A/c Dr. 26000 To David’s Capital A/c 26000

Bank A/c Dr. 30000 To David’s Capital A/c 30000

Solution

Question 6

Decrease

Written off

Credited

Increase

Solution

Question 7

Ram

Anu

Both Ram and Anu

Anu and Chander

Solution

Question 8

Old partner’s Capital A/c

Goodwill A/c

New partner’s A/c

Gaining Partner’s A/c

Solution

Question 9

3:4

2:1

4:3

7:3

Solution

Question 10

4:2:3

2:4:3

3:2:1

3:4:2

Solution

Question 11

Cash/Bank A/c Dr. 30000 To Geeta's Capital A/c 50000

Cash a/c Dr. 50000 To Geeta's Capital a/c 50000

Cash/Bank A/c Dr. 20000 To Geeta's Capital A/c 50000

Cash/Bank A/c Dr. 5000 To Geeta's Capital A/c 5000

Solution

Question 12

₹110000

₹120000

₹115000

₹100000

Solution

Bank A/c Dr. 22000
To Goodwill A/c 22000

Bank A/c Dr. 34000
To Vivek Capital A/c 34000

Bank A/c Dr. 26000
To David’s Capital A/c 26000

Bank A/c Dr. 30000
To David’s Capital A/c 30000

Cash/Bank A/c Dr. 30000
To Geeta's Capital A/c 50000

Cash a/c Dr. 50000
To Geeta's Capital a/c 50000

Cash/Bank A/c Dr. 20000
To Geeta's Capital A/c 50000

Cash/Bank A/c Dr. 5000
To Geeta's Capital A/c 5000

A's capital A/c Dr. 1700
B's capital A/c Dr. 1300
To Goodwill 3000

A's capital A/c Dr. 1500
C's capital A/c Dr. 1500
To Goodwill 3000

A's capital A/c Dr. 1800
B's capital A/c Dr. 1200
To Goodwill 3000

A's capital A/c Dr. 1500
B's capital A/c Dr. 1500
To Goodwill 3000

Bank A/c Dr. 21000
To Premium for Goodwill A/c 21000

Bank A/c Dr. 75000
To Cash A/c 75000

Bank A/c Dr. 2100
To Goodwill A/c 2100