ADMISSION OF A PARTNER

Transcription

1 ADMISSION OF A PARTNER 1. What do you understand by admission of a partner? 2. What is Hidden Goodwill? How is it adjusted on the admission of a partner? 3. When new partner gives cash for goodwill, the amount of goodwill is credited to what account? 4. The general reserve at the time of admission of partner is transferred to what account? 5. Revaluation account is a A) Personal Account B) Real Account C) Nominal Account 6. List any two matters that need adjustment at the time admission of a partner. 7. State two right acquired by new partner. 8. What is meant by Sacrificing Ratio? 9. Give the name of compensation which is paid by a new partner to sacrificing partners for sacrificing their share of profit. 10. What is new profit sharing ratio? 11. What will be accounting treatment of General Reserve appearing in the Balance Sheet at the time of admission of partner? 12. Give two circumstances in which sacrificing ratio may be applied. 13. Why is it necessary to revalue the Assets and Liabilities in case of the admission of a partner? 14. X, Y and Z are partners sharing profits and losses in the ratio of 5:3:2. They admit A into partnership and give him 1/5 th share of profits. Find out the new profit sharing ratio. 15. A and B are partners sharing profits and losses in the ratio of 2:1. They take C as a partner for 1/5 th share. The goodwill account appears in the books at its full value Rs. 15,000. C is to pay proportionate amount as premium for goodwill which he pays to A and B privately. Pass the necessary entries. 16. 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 th share. C brings in Rs. 30,000 as capital and Rs. 10,000 as goodwill. At the time of admission of C, goodwill appears in the Balance Sheet of A and B at Rs. 3,000. The new profit sharing ratio of the partners will be 5:3:2 pass the necessary entries. 17. A and B are partners in a business sharing profits in the ratio of 3:2. On 1 st April, 2009 they admit Z as a new partner for 1/4 th share in the profits, Z contributed the following assets towards his capital and for his share of goodwill: Stock Rs. 60,000 debtors Rs. 80,000; Land Rs. 1,00,000, Plant and Machinery Rs. 40,000. On the date of admission of Z, the goodwill of the firm was valued at Rs. 6,00,000 Record the necessary Journal entries in the books of the firm on Z s admission. 18. A and B are partners sharing profits in the ratio of 3:2. They admit C into the firm for 3/7 th profits which he take s 2/7 th from A and 1/7 th from B and brings in Rs. 10,000 as premium out of his share of Rs. 16,000. Give the Journal entries to record the transactions. 19. A and B are partners sharing profits in the ratio of 3:2. Their books show goodwill at Rs. 2,000. C is admitted with 1/4 th share of profits and brings in Rs. 10,000 as

2 his capital but is not able to bring in cash as his share of goodwill Rs. 3,000 Draft the Journal entries. 20. X and Y are partners with capitals of Rs. 1,30,000 and Rs. 90,000 respectively. They admit Z into partnership for 1/5 th share in the profits of the firm. Z brings Rs. 80,000 as his capital Give the journal entries to record goodwill. Valuation of Goodwill 1. How does the goodwill arise? 2. Why is goodwill considered as an intangible assets but not a fictitious assets? 3. What do you understand by super profit? 4. What is meant by goodwill? Name any two methods of valuation of goodwill. 5. A and B are partners in a firm sharing profits and losses in the ratio of 2:1. They decide to take C into partnership for 1/4 th share on 1 st January, 2010.; For the purpose, goodwill is to be valued at four times the average annual profits of the previous four or five years whichever is higher. The agreed profits for goodwill purpose of the past five years are: Rs. 14,000; 2006-Rs. 15,500; 2007-Rs. 10,000; 2008-Rs. 16,000; Rs. 15,000. Find out the value of goodwill. 6. On April 1st, 2011 an existing firm had assets of Rs. 75,000/- including cash of Rs. 5,000/-. The partner s capital account showed a balance of Rs. 60,000/- and reserve constituted the rest. If the normal rate of return is 10% and the goodwill of the firm is valued at Rs. 24,000/- at 4 year purchase of super profits, find the average profits of the firm. 7. On April 1, 2012 an existing firm had assets of Rs.3,00,000 including cash of 20,000. The partner s capital accounts showed a balance of Rs.2,40,000 and reserve constituted the rest. If the normal rate of return is 10% and average profit is Rs.96,000. Calculate value of goodwill by both capitalization methods. 8. A purchased B s business with effect from 1 st January, It was agreed that the firm s goodwill is to be valued at two year s of purchase of average profit of last three years. the profit of B s business for the last three years were: Rs. 80,000 (including an abnormal gain of Rs. 10,000) Rs 1,00,000 (after charging loss fire theft Rs. 20,000) Rs. 90,000 (excluding Rs. 10,000 as insurance premium on firm s property- now to be insured) Calculate the value of the firm s goodwill. 9. Difference between Super Profit and Average Profit. 10. When goodwill is shown in Balance Sheet.

3 Accounting for partnership: - Fundamentals 1. What do you understand by Partnership? 2. Mention important provisions of partnership Act, 1932, which are applicable in the absence of partnership deed. 3. Give two items appearing on the credit side of capital a/c when they are fluctuating? 4. Distinguish between Fixed Capital Account and Fluctuating Capital Account. 5. State the rules relating to calculation of interest on drawings under monthly drawings method and under Quarterly Drawings method. 6. X has given a loan of 50,000 to the firm. He claims 10% p. a. interest. Is his claim valid in case partnership deed is silent in this matter? 7. A, B, C are partners sharing profits in the ratio 5:4:1. C is given a guarantee that his share in any year will not be less than Rs 5000.The profits for the year ending 31/03/99 amounted to Rs 35,000.Amount of shortfall in profits given to C will be borne by A and B in ratio 3:2 8. A & B are partners. A s capital Rs 1,00,000 and B s Rs 60,000.intrest on capital is p.a. B is entitled to a salary of Rs 3,000 per month. Profit and loss of current year before interest and salary to B is Rs 80,000. Prepare profit and loss appropriation account. 9. A, B and C are partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. Their fixed capitals were 15,00,000, 30,00,000 and 60,00,000 respectively. For the year 2012 interest on capital was credited to 12% instead of 10%. Pass the necessary adjustment entry. 10. On 31 st March, 2013 after the close of books of accounts, the capital account of Ram, Shyam and Mohan showed balance of Rs. 24,000, Rs. 18,000 and Rs. 12,000 respectively. The profit for the year ended 31 st March, 2013 amounted to Rs. 36,000 and the partner s drawings had been Ram 300p.m. at the begning of every month, Shyam Rs. 375 p.m. at mid of every month and Mohan Rs. 2,700p.a. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1.Interest on 6% p.a. and interest on 6%p.a. Prepare Profit and Loss Appropriation Account. 11. A and B are partners sharing profits in the ratio of 3:2 with capital of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is 6% p.a. B is to be allowed an annual salary of Rs. 2,500, during 2009, the profits of the year prior to calculation of interest on capital but after charging B s salary amounted to Rs. 12,500. A provision of 5% of the profits is to be made in respect of manager s commission. Prepare an account showing the allocation of profits and partner s capital accounts. 12. X and Y were partners in a firm sharing profits in the ratio of 3:2, On their fixed capital were Rs. 3,00,000 and Rs. 2,50,000 respectively. On , they decided that their total fixed asset capital should be Rs. 6,00,000. They further

4 decided that this capital should be in their profit sharing ratio, Accordingly, they introduced extra capital or withdrew excess capital. The partnership deed provided for the following: (i) Interest on 12% p.a. (ii) Interest on 18% p.a. (iii) A monthly salary of Rs. 2,000 to X and a monthly salary of Rs. 1,500 to Y. The drawings of X and Y during the year were as follow: Year 2012 X (Rs.) Y (Rs.) June 30 20,000 15,000 September 30 20,000 25,000 During the year ended , the firm earned a net profit of Rs. 1,50, % of this profit was to be transferred to general reserve. You are required to prepare Profit and Loss Appropriation Account, Partners capital Accounts and Partners current Accounts. 13. A and B agreed to share profits and losses as follows First Rs. 5,000 to A and the balance in the ratio of 3:2. The profit for the year was Rs. 30,000, which has already been distributed among the partners. The opening capitals of the partners are A Rs. 50,000 and B Rs. 36,000. Interest on capital was omitted from the books which is to be allowed at 6% p.a. Pass necessary journal entry for the above adjustments. 14. The partners of a firm distributed the profits for the year ended 31 st March, 2003, Rs. 90,000 in the ratio of 3:2:1 without providing for the following adjustments: A and B were entitled to a salary of Rs. 1,500 each per annum. B was entitled to a commission of Rs. 4,500. B and C had guaranteed a minimum profit of Rs. 35,000 p.a. to A. Profits were to be shared in the ratio of 3:3:2. Pass necessary journal entry for the above adjustments in the books of the firm. 15. A and B were in partnership sharing profits and losses in the ratio of 3:2. In appreciation of the services of C who was in receipt of a salary of Rs. 24,000 per annum and a commission of 5% of the net profit after charging such salary and commission they took him into partnership from 1 st April, 2009 giving him 1/8 th share of profits. The agreement provided that any excess over his former remuneration to which C becomes entitled will be borne by A and B in the ratio of 2:3. The profits for the year ended 31 st March, 2010 amounted to Rs. 4,44,000. Prepare the Profit and Loss Appropriation Account. 16. X, Y and Z are partners with capitals of Rs ; Rs and Rs respectively. Partners will share profits or losses in 5:3:2. There Partnership deed provides that i. Interest on Partners Capital should be 5% p.a. ii. Interest on Drawings should be 10% p.a. (Drawings: X Rs ; Rs. 6000; Rs. 4000) iii. iv. The partners are entitled to a partnership salary of Rs each per annum. X is entitled to a 10% on the profit before charging the above provisions.

5 v. Z is entitled to a 10% on the net profit (after charging the above provisions) after charging his commission. vi. 25% of the net profit (after charging all the above provisions) should be transferred to Reserve Fund. The profit for the year ended 31 st March amounted to Rs Prepare the profit and Loss appropriation account. 17. X, Y, and Z are partners with fixed capitals of 1,50,000, 1,20,000 and 1,00,000 respectively. The Balance of current accounts on 1st January, 2011 were X 8,000 (Cr.); Y 3,000 (Cr.) and Z 2,000 (Dr.). The partnership deed provided for the following: (a) Interest on Capital at 5% p. a. (b) Interest on drawings at 6% p. a. Each partner drew 10,000. (c) 20,000 is to be transferred to a Reserve Account. (d) Profit and Loss to be shared in the proportion of 3:2:1 upto 60,000 and above 60,000 equally. Net profit of the firm before above adjustments was 1,15,400. From the above information, prepare Profit and Loss Appropriation Account, Capital and Current Accounts of the partners. 18. X,Yand Z are partner sharing profit and losses in the ratio of 3:2:1. After the final accounts have been prepared, it was discovered that interest on drawings had not been taken into consideration. The interest on drawings of partner amounted to X ` 250. Y `180 and z `100. Give the necessary adjusting entry