Reconstitution of a Partnership Firm: Admission of a Partner MCQ

Question 1

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.

Question 2

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)

Question 3

is the ratio in which the old or existing partners forego 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.

Question 4

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

Question 5

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)

Question 6

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.Super Profits * (100 / Average Rate of Return)

SOLUTION

Solution : B

Capitalised Value of Super Profits = Super Profits * (100 / Normal Rate of Return)

Question 7

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

Question 8

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

Question 9

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

Question 10

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