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Goodwill brought in by the incoming partner in cash for joining in a partnership firm is adjusted by giving affect to old partners capital accounts in:
A.capital ratio
B.sacrificing ratio
C.new profit sharing ratio
D.old profit sharing ratio
SOLUTION
Solution : B
Goodwill brought in by the incoming partner in cash for joining in a partnership firm is adjusted by giving affect to old partners capital accounts in sacrificing ratio.
Capitalised Value of Super Profits =
A.None of these
B.Super Profits * (100 / Normal Rate of Return)
C.Average Profits * (100 / Normal Rate of Return)
D.Average Profits * (100 / Average Rate of Return)
SOLUTION
Solution : B
Capitalised Value of Super Profits = Super Profits * (100 / Normal Rate of Return)
is the ratio in which the old or existing partners foregone their share of profit in favour of the new or incoming partner.
A.Sacrificing Ratio
B.New Ratio
C.Old Ratio
D.Gaining Ratio
SOLUTION
Solution : A
Sacrificing ratio is the ratio in which the old or existing partners forego their share of profit in favour of the new or incoming partner.
Which of the following is not a method to calculate goodwill by using capitalization method ?
A.None of these
B.Capitalisation of Future Profits Method
C.Capitalisation of Super Profits Method
D.Capitalisation of Average Profits Method
SOLUTION
Solution : B
There are two ways of calculating Goodwill under this method:
(i) Capitalisation of Average Profits Method
(ii) Capitalisation of Super Profits Method
Profit and losses ratio is for 3:2:1, for A, B and C respectively. From 1st April 2018, they decide to share profit and losses equally. Value of Goodwill of the firm is Rs 24,000. Who amongst the following has made a sacrifice?
A.None of these
B.Both A & B
C.A only
D.B only
SOLUTION
Solution : C
Old ratio: 3:2:1
New ratio: 1:1:1
Sacrificing or gaining ratio= Old ratio – New ratio
A’s share= 3/6 – 1/3 = -1/6 (sacrifice)
What is the journal entry passed when an asset is brought in by new partner?
A. Cash A/c Dr
To Asset A/c
B.Asset A/c Dr
To New Partner's Capital A/c
C.Cash A/c Dr
To New Partner's Capital A/c
D.New Partner's Capital A/c Dr
To Cash A/c
SOLUTION
Solution : B
The journal entry passed when an asset is brought in by new partner is:
Asset A/c Dr
To New Partner's Capital A/c
X & Y are partners sharing profit in the ratio of 5:3. Z is admitted as a new partner. X surrendered 1/5th of his share & Y surrendered 1/3rd of his share in favor of Z. What shall be the sacrificing ratio ?
A.4:5
B.1:1
C.3:2
D.3:1
SOLUTION
Solution : B
X surrenders 1/5th of his share = 1/5 of 5/8 = 1/8
y surrenders 1/3rd of his share = 1/3 of 3/8 = 1/8
Sacrificing ratio = 1:1
Old ratio of A,B & C is 5:4:1.Calculate the new profit sharing ratio, when C acquires 1/5th Share from A & B equally.
A.None of these
B.3:4:3
C.4:3:3
D. 3:3:4
SOLUTION
Solution : C
Old ratio between A:B:C = 5:4:1.
C acquires 1/5th Share from A & B equally
B’s sacrifice= 1/5 X 1/2 = 1/10
A’s sacrifice= 1/5 X 1/2 = 1/10
C`s gain= 1/5
A = 5/10 -1/10 = 4/10
B = 4/10 - 1/10 = 3/10
C= 1/10 + 1/5 = 3/10
A:B:C = 4:3:3
A and B share profits and losses in the ratio of 3/5 and 2/5 respectively and having capital account balances of Rs 1,00,000 each. At the time of revaluation, the firm’s total book value of assets was Rs 60,000 while they can only be sold for Rs 40,000. Which of the following is the balance of A’s capital account after revaluation of firm’s assets?
A.Rs 72,000
B.Rs 88,000
C.Rs 1,12,000
D.Rs 1,00,000
SOLUTION
Solution : B
A`s capital before revaluation = 1,00,000
Revaluation loss = 60,00 - 40,000 = 20,000
A`s share in loss= 20,000 X 3/5 = 12,000
New capital = 1,00,000 - 12,000 = Rs 88,000
A and B are partners sharing profits in the ratio of 3:2. They admit C with 1/8 share in the profits. The new profit sharing ratio between Aand B is 4:3. The new profit sharing ratio and sacrificing ratio will be:
A.3:4:1, 4:1
B.4:3:1, 4:1
C.4:3:1, 1:4
D.None of these
SOLUTION
Solution : B
New Ratio between A& B is 4:3
And they have admitted C for 1/8 share
So, New Ratio = 4:3:1
Sacrificing Ratio(SR) = old share-new share
Share Sacrificed by A = 3/5-4/8=4/40
Share Sacrificed by B = 2/5-3/8=1/40
Sacrificing Ration of A&B = 4:1
Number of years of purchase refers to the number of years the firm will be able to earn _____ in future.
A.Profits
B.Losses
C.Either A or B
D.None of these
SOLUTION
Solution : A
Number of years of purchase refers to the number of years the firm will be able to earn the profits in future.
A and B are partners sharing profits in the ratio of 5:3. They admit C and the new profit sharing ratio is agreed at 4:2:1.The sacrificing ratio will be:
A.3:5
B.2:1
C.1:1
D.5:3
SOLUTION
Solution : A
sacrificing share= old share -new share
A's sacrificing share= 5/8-4/7=3/56
B's sacrificing share= 3/8-2/7=5/56
Sacrificing ratio= 3:5
While calculating goodwill by weighted average profits methods, total profits multiplied by weights are divided by___
A.Total number of years
B.Total of weights
C.No. of years of purchase
D.None of these
SOLUTION
Solution : B
Weight Average Profit = Total Profits (multiplied with weights) / Total weights
In the balance sheet prepared after the new partnership agreement, assets and liabilities are shown at:
A.current cost
B.realisable value
C.revalued figure
D.original value
SOLUTION
Solution : C
In the balance sheet prepared after the new partnership agreement, assets and liabilities are shown at revalued figures.
Capital Employed =
A.Total assets – Outside liabilities.
B.Fixed assets - Outside liablities
C.Total liabilities - Total assets
D.Fixed assets - Current liabilities
SOLUTION
Solution : A
Capital Employed = Total assets – Outside liabilities.
What is the entry for withdrawal of amount brought in as goodwill by old partners?
A. New Partner's Capital A/c Dr
To Ol Partner's Capital A/c
B. Cash A/c Dr
To New Partner's Capital A/c
C. Old Partner's Capital A/c Dr
To Cash A/c
D. None of these
SOLUTION
Solution : C
The entry is going to be:
Old Partner's Capital A/c Dr
To Cash A/c
The profits of a firm for the last two years are 45,000 and 30,000. What would be the value of goodwill on the basis of 1 years purchase of the weighted average profits ?
A.Rs 30,000
B.Rs 40,000
C.Rs 45,000
D.Rs 50,000
SOLUTION
Solution : B
Weighted Profits = (45,000*2) + (30,000*1)
= 1,20,000
Weighted Average Profit = 1,20,000 / 3
= 40,000
Goodwill = Weighted Average Profit X Number of year’s purchase
= 40,000 * 1
= Rs. 40,000
A and B are partners sharing profits in the ratio of 3:2. C is admitted into the firm for 1/5th share in the profit which he acquires equally from A and B. The new profit sharing ratio will be:
A.6:2:2
B.5:3:2
C.4:4:2
D.3:5:2
SOLUTION
Solution : B
C's share=1/5
A's sacrifice= 1/5*1/2=1/10
B's sacrifice= 1/5*1/2=1/10
A's new share=3/5-1/10=5/10
B's new share=2/5-1/10=3/10
C's share=1/5=2/10
New profit sharing ratio= 5:3:2
Super Profit =
A.Normal Profit + Average Profit
B. Normal Profit - Average Profit
C.Average Profit – Normal Profit
D.Average Profit * Normal Profit
SOLUTION
Solution : C
Super Profit = Average Profit – Normal Profit
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C into the partnership for one-fourth share of the profits while A and B as between themselves sharing profits and losses equally. The new profit sharing ratio (NR) between A, B and C will be:
A. 3:2:2
B.3:3:2
C.4:2:2
D.None of these
SOLUTION
Solution : B
C's share =1/4=2/8
Balance share= 1-1/4=3/4
Balance share to be shared equally.
A's share = 3/4*1/2=3/8
B's share= 3/4*1/2 =3/8
New Profit sharing ratio of A,B & C = 3:3:2
If the value of assets is increased, the gain will be _______ to the revaluation account
A.Credited
B.No change
C.Debited
D.None of these
SOLUTION
Solution : A
If the value of assets is increased, the gain will be credited to the revaluation account
X&Y are partners sharing the profits in the ratio of 3:2. They admit Z who takes 2/7 from X and 1/7 from Y. The new profit sharing ratio will be:
A.9:11:15
B.11:9:15
C.15:11:9
D.15:9:11
SOLUTION
Solution : B
New share of X= 3/5-2/7=11/35
New share of Y=2/5-1/7=9/35
Z's share = 2/7+1/7=3/7=15/35
New ratio= 11:9:15
Accumulated profits and reserves are distributed to partners in their ___
A.Sacrificing Ratio
B.New Profit Sharing Ratio
C.Old Profit Sharing Ratio
D.Gaining Ratio
SOLUTION
Solution : C
Accumulated profits and reserves are distributed to partners in their old profit sharing ratio.
Profit/loss on revaluation of assets is shared by the old partners in their :
A.old profit sharing ratio
B.sacrificing ratio
C.new profit sharing ratio
D.capital ratio
SOLUTION
Solution : A
Profit/loss on revaluation of assets is shared by the old partners in their old profit sharing ratio.
Revaluation A/c is debited :
A.To transfer loss on revaluation
B.For decrease in the amount of creditors
C.For an increase in the value of land and building
D.For an increase in provision for doubtful debts
SOLUTION
Solution : D
Revaluation A/c is debited for an increase in provision for doubtful debts
Under which method, goodwill is calculated by dividing super profits with normal rate of return
A.Capitalisation method
B.Weighted profits method
C.Average profits method
D.Super profits method
SOLUTION
Solution : A
Capitalisation method = Super Profits / Normal Rate of Return
1. X and Y are sharing profits and losses in the ratio of 3: 2. They admit Z as a partner and give him 2/10th share in the profits. The new profit-sharing ratio will be
(a) 12:8:5.
(b) 3:2:2
(c) 3:2:5.
(d) 2:1:2.
Answer - 1. (a);
2. Shiv and Mohan are sharing profits and losses in the ratio of 5: 3. They admit Jea as a partner and give him 3/10th share of the profits. This share he will get 1/5th from Shiv and 1/10th from Mohan. The new profit-sharing ratio will be
(a) 5:6:3.
(b) 2:4:6.
(c) 17:11:12.
(d) 18:24:38.
Answer - 2. (c);
3. Profit or Loss on revaluation of assets and reassessment of liabilities is transferred to Partners' Capital Accounts in their
(a) Capital Ratio.
(b) Equal Ratio.
(c) Old Profit-sharing Ratio.
(d) Gaining Ratio.
Answer - 3. (c);
4. Aditya and Shiv were partners in a firm with capitals of 3,00,000 and 2,00,000, respectively. Naina was admitted as a new partner 1/4th share in the profits of the firm. Naina brought 1,20,000 for her share of goodwill premium and 2,40,000 for her capital. The amount of goodwill premium credited to Aditya will be
(a) 40,000.
(b) 30,000.
(c) 72,000.
(d) 60,000.
Answer - 4. (d);
5. Unrecorded assets or liabilities are transferred to
(a) Partners' Capital Accounts.
(b) Revaluation Account.
(c) Profit and Loss Account.
(d) Partners' Current Accounts.
Answer - 5. (b);
6. X and Y are partners sharing profits in the ratio of 3: 2, and capitals as 100,000 and 50,000 respectively. Z is admitted for 1/5th share in profits. The amount Z will contribute as capital will be
(a) 50,000.
(b) 35,000.
(c) 37,500.
(d) 60,000.
Answer - 6. (c);
7. X and Y are partners sharing profits and losses in the ratio of 3: 2. Z was admitted for the 1/5th share and for this he brings *150,000, as capital. If capitals are to be proportionate to profit-sharing ratio, the respective capitals of the partners will be
(a) 3,00,000 : 3,00,000 : 1,50,000.
(b) 3,60,000 : 2,40,000 : 1,50,000.
(c) 1,50,000 : 1,50,000 : 1,50,000.
(d) 1,50,000 : 2,00,000 : 4,00,000.
Answer - 7. (b);
8. Goodwill brought by the incoming partner is distributed among the old partners in their
(a) Old profit-sharing ratio.
(b) New profit-sharing ratio.
(c) Sacrificing ratio.
(d) Gaining ratio.
Answer - 8. (c);
9. When goodwill existing in the books is written off at the time of it is transferred to Partners' Capital Accounts in their
(a) Old profit-sharing ratio.
(b) New profit-sharing ratio.
(c) Sacrificing ratio.
(d) Gaining ratio.
Answer - 9. (a);
10. A and B are partners sharing profits in the ratio of 2: 3, they admit C as a partner for 1/4th share, the admission of a partner, sacrificing ratio of A and B will be
(a) 2:3.
(b) 1:1.
(c) 3:2.
(d) 2:1.
Answer - 10. (a)
11. When a new partner is admitted, the balance of 'General Reserve' appearing in the Balance Sheet at the time of admission is credited to
(a) Profit and Loss Appropriation Account.
(b) Capital Accounts of all the partners.
(c) Capital Accounts of Old Partners.
(d) Revaluation Account.
Answer - 11. (c)
13. Increase in the value of liabilities at the time of admission of a partner is
(a) Debited to Revaluation Account.
(b) Credited to Revaluation Account
(c) Credited to Partner's Capital Account.
(d) Debited to Partner's Capital Account.
Answer - 13. (a);
14. For which of the following situations, old profit-sharing ratio of partners is used at the time of admission of a new partner?
(a) When new partner brings only a part of his share of goodwill.
(b) When new partner is not able to bring his share of goodwill.
(c) When, at the time of admission, goodwill already exists in the Balance Sheet.
(d) When new partner brings his share of goodwill in cash.
Answer - 14. (c);
15. A and B are partners in a firm having a capital of 54,000 and 36,000 respectively. They admitted C for 1/3rd share in the profits. C brought proportionate amount of capital. The capital brought in by C would be
(a) 90,000.
(b) 45,000.
(c) 5,400.
(d) 3,600.
Answer - 15. (b);
16. P and Q are partners in a firm having capitals of 15,000 each. R is admitted for 1/3rd share for which he has to bring 20,000 for his share of capital. The amount of goodwill will be
(a) 8,000.
(b) 10,000.
(c) 9,000.
(d) 11,000.
Answer - 16. (b);
17. When the new partner brings cash for goodwill, the amount is credited to
(a) Revaluation Account.
(b) Cash Account.
(c) Premium for Goodwill Account.
(d) Realisation Account.
Answer - 17. (c);
18. New partner can be admitted into partnership
(a) with the consent of any one partner.
(b) with the consent of majority of partners.
(c) with the consent of all the partners.
(d) with the consent of 2/3rd of old partners.
Answer - 18. (c);
19. X and Y are partners sharing profits in the ratio of 2 : 1. They admit Z into the partnership for 1/4th share in profits for which he brings 20,000 as his share of capital. Hence, the adjusted capitals of X and Y will be
(a) 40,000 and 20,000 respectively.
(b) 32,000 and 16,000 respectively.
(c) 60,000 and 30,000 respectively.
(d) 20,000 and 40,000 respectively.
Answer - 19. (a);
20. At the time of admission, if the profit-sharing ratio among the old partners does not change then sacrificing ratio will be
(a) equal.
(b) according to the contribution of capital.
(c) their old profit-sharing ratio.
(d) according to new partner.
Answer - 20. (c).
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