1 If the partner’s capitals are fixed, where will you record interest on drawings and share of profit of a partner?
2 What is a Partnership Deed?
3 Name any two factors affecting goodwill of a partnership firm.
4 State any two occasions when reconstitution of a partnership firm takes place.
5 Arun, Aaron and Allen are partners sharing profits in the ratio of 5:3:2. Calculate the new profit sharing ratio if Allen acquires 1/5th share from Arun and 1/6th share from Aaron.
6 Asha and Usha are partners in a firm sharing profits and losses in the ratio of 3:2. They admitted Sushma as a partners for 1/4th share. Sushma paid ₹.1,60,000 privately outside the business. Pass the necessary journal entry in the books of the firm.
7 State the two rights acquired by a newly admitted partner.
8 Reena and Raman are partners in a firm sharing profits in the ratio of 4: 3. They admitted Roma as a new partner. The new profit sharing ratio between Reena, Raman and Roma was 3: 2: 2. Raman surrendered 1/3rd of his share in favour of Roma. Calculate Reena’s sacrifice.
9 X, Y and Z entered into partnership on 1st July 2016 to share Profit and losses in the ratio of 3:2:1. X personally guaranteed that Z’s share of profit after charging interest on capital @ 6%p.a would not be less than ₹.72,000p.a. The capital contributed by X- ₹.4,00,000 ; Y- ₹. 2,00,000 and Z- ₹.2,00,000. Profit for the year ended 31st March 2017 was ₹.2,76,000. Prepare Profit & Loss Appropriation a/c.
10 Average profit of the firm is ₹.3,00,000. Total tangible assets in the firm are ₹.28,00,000 and outside liabilities are ₹.8,00,000. In the same type of business, the normal rate of return is 10% of the capital employed. Calculate the value of goodwill by Capitalization of super profit method.
11 A, B and C were partners in a firm sharing profits and losses equally. The firm was engaged in the shortage and distribution of leather bags and its warehouse were located at three different places in the city. Each warehouse was being managed individually by A, B and C. Because of increase in business activities at the warehouse managed by B, he had to devote more time. B demanded that his share in the profits of the firm be increased, to which A and C agreed. The new profit sharing ratio was agreed to be 1:2:1. For this purpose goodwill of the firm was valued at 2 years purchase of the average profit of last 5 years. The profits of the last 5 years were as follows:
You are required to:
a) Calculate the goodwill of the firm.
b) Pass necessary journal entry for the treatment of goodwill on change in profit sharing ratio of A, B and C.
12 L and M are partners in affirm sharing profits in the ratio of 5:3. They admit N and decide that the profit sharing ratio between M and N shall be same as existing between L and M. Calculate new profit sharing ratio and the sacrificing ratio.
13 Karishma and Grishma are partners doing a business in Amritsar sharing profits in the ratio 2:1 with capitals ₹.10,00,000 and ₹.8,00,000 respectively. Karishma withdrew the following amounts during the year to pay the expenses of her daughter:
1st April ₹.20,000
1st June ₹.18,000
1st November ₹.28,000
1st December ₹. 10,000
Grishma withdrew ₹.30,000 on the 1st day of April, July and October and January to pay the electricity of her house. She also paid ₹.40,000 per month as rent for the office of partnership. Calculate interest on drawings @ 6%p.a.
14 M/s Info tech India had assets of ₹.10,00,000 whereas liabilities are: Partners capital - ₹.7,00,000, General Reserve ₹.1,20,000 and Sundry Creditors - ₹.1,80,000. If the normal rate of return is 10% and goodwill of the firm is valued at ₹.1,80,000 at 2 years purchase of Super profit, find average profit of the firm.
15 Rohan, Mohan and Sohan are sharing profits and losses in the ratio of 5:3:2. They decided to share profits and losses in the ratio of 2:3:5 with effect from 1st April 2018. They also decide to record the effect of the following without effecting their book values, by passing an adjustment entry:
General Reserve ₹.6,00,000
Contingency Reserve ₹.1,50,000
Profit and loss (Cr) ₹.3,00,000
Advertising Suspense account ₹.4,00,000
16 A, B and C are partners sharing profits and losses in the ratio of 4:3:2, decided to take D as a partner for 1/5th share in the firm with effect from 1st April 2018. An extract of their Balance sheet as at 31st March 2018 is:
Show the accounting treatment of Workmen Compensation Reserve and Investment Fluctuation Reserve on the admission of D under the following alternative cases:
a) If the claim on account of workmen compensation is estimated at ₹.90,000.
b) If the market value of investment is ₹.4,36,000.
17 Pankaj and Naresh were partners in a firm sharing profits in the ratio of 3:2. Their fixed capitals were ₹. 3,20,000 and ₹. 2,40,000 respectively. On 1.1.2017, Saurabh was admitted as a new partner for 1/4 th share in the profits. Saurabh brought ₹. 3, 00,000 as his capital which was to be kept fixed like the capitals of Pankaj and Naresh. Calculate the goodwill of the firm on Saurabh’s admission and the new profit sharing ratio of Pankaj, Naresh and Saurabh. Also, pass necessary journal entry for the treatment of goodwill.
18 W and R are partners in a firm sharing profits in the ratio of 3:2. Their Balance Sheet as on 31st March, 2016 was as follows :
On the above date C was admitted for 1/6th share in the profits on the following terms :
(i) C will bring Rs.30,000 as his capital and Rs.10,000 for his share of goodwill premium, half of which will be withdrawn by W and R.
(ii) Debtors Rs.1,500 will be written off as bad debts and a provision of 5% will be created for bad and doubtful debts.
(iii) Outstanding salary will be paid off.
(iv) Stock will be depreciated by 10%, furniture by Rs.500 and Plant and machinery by 8%.
(v) Investments Rs.2,500 not mentioned in the balance sheet were to be taken into account.
(vi) A creditor of Rs.2,100 not recorded in the books was to be taken into account. Pass necessary Journal Entries for the above transactions in the books of the firm on C’s admission.
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