Quantitative Aptitude

Partnership

842 Questions
All Capital changes, admission, and withdrawal 249 Compound partnership and time-weighted capital 186 Absolute profit or percentage difference to ratio 126 Simple partnership 100 Working and sleeping partners 79 Retirement and gaining ratio 63 Interest on capital and fixed allowances 39

Partnership Questions

Multiple choice

Amit and Varun are partners with capital balances of Rs. 60,000 and Rs. 20,000, respectively. Profits and losses are divided in the ratio of 60:40. Amit and Varun decided to form a new partnership with Amit, who invested land valued at Rs. 15,000 for a 20% capital interest in the new partnership. Amit's cost of the land was Rs. 12,000. The partnership elected to use the bonus method to record the admission of Amit into the partnership. Amit's capital account should be credited for________.

  1. 12,000

  2. 15,000

  3. 16,000

  4. 19,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Multiple choice

X and Y are partners sharing profits and losses in the ration of 3:2 having the capital of Rs. 1,60,000 and Rs. 1,00,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs.15,600 before allowing any interest on capital. Profits apportioned among X and Y is ___________.

  1. Rs.9,360 and Rs. 6,240

  2. Rs. 9,600 and Rs. 6,000

  3. Rs. 10,000 and Rs. 5,600

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on capital: X = 1,60,000 * 9% = 14,400. Y = 1,00,000 * 9% = 9,000. Total interest = 23,400. Since the profit (15,600) is less than the interest due (23,400), the profit is distributed in the ratio of the interest due, which is 14,400:9,000 = 8:5. X gets (8/13)*15,600 = 9,600. Y gets (5/13)*15,600 = 6,000.

Multiple choice

X, Y and Z are partners in a firm. At the time of division of profit for the year, there was a dispute between the partners. Profits before interest on partner's capital were Rs.12,000 and Z demanded a minimum profit of Rs. 10,000 as his financial position was not good. However, there was no written agreement on this profit. Calculate the amount payable to X, Y and Z.

  1. Other partners will pay Z the minimum profit and will suffer loss equally.

  2. Other partners will pay Z the minimum profit and will suffer loss in capital ratio.

  3. X, Y will take Rs. 1,000 each and Z will take Rs. 10,000.

  4. Rs. 4,000 to each of the partners.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In the absence of a written agreement, profits are shared equally among partners regardless of capital or individual demands. 12000 / 3 = 4000 each.

Multiple choice

A and B are partners in a business sharing profits in the ratio of 5 : 3. They admit C as a partner with 1/4 share in the profits which he acquires 3/4 from A and 1/4 from B. He pays 4,000 as his share of Goodwill A and B will be credited by:

  1. 2,500 and 1,500 respectively

  2. 2,000 each

  3. 1,000 and 3,000 respectively

  4. 3,000 and 1,000 respectively
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

C gets 1/4 share. A gives 3/4 of 1/4 = 3/16. B gives 1/4 of 1/4 = 1/16. The sacrifice ratio is 3:1. Goodwill 4000 is divided in 3:1 ratio, resulting in 3000 and 1000.

Multiple choice

A, B and C were partners sharing profits and losses in the ratio of 3 :2 :1. A retired and Goodwill of the firm is to be valued at Rs. 48,000 and Goodwill Account is to be raised which is not appearing in the balance sheet. What will be the treatment for Goodwill?

  1. Credited to Revaluation Account at Rs 48,000

  2. Credited to partners capital account Rs. 48,000 in profit sharing ratio

  3. Only A's capital account credited with Rs. 24,000

  4. Only A's capital account credited with Rs. 48,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When goodwill is raised and not appearing in the balance sheet, it is recorded by debiting the Goodwill Account and crediting all partners' capital accounts in their old profit-sharing ratio.

Multiple choice

A and B were equal partners in a firm. On $1-1-2001$, they admitted C on the following conditions: C should bring $Rs. 20,000$ as capital, and $Rs. 10,000$ as goodwill. In future A, B and C would share profits and losses in the ratio of $2 : 1 : 2$. A and B will share the goodwill in the ratio of _________.
  1. $1 : 1$
  2. $3 : 1$
  3. $1 : 3$
  4. $2 : 1$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Old ratio A:B = 1:1. New ratio A:B:C = 2:1:2. Sacrificing ratio = Old - New. A sacrifices 1/2 - 2/5 = 1/10. B sacrifices 1/2 - 1/5 = 3/10. Goodwill is shared in the ratio of sacrifice, which is 1/10 : 3/10 = 1:3.

Multiple choice

Goodwill of a firm of A and B is valued at $Rs, 50,000$. A and B share profits in the ratio of $3 : 1$ and C is admitted for $1/5^{th}$ share. If C does not bring goodwill in cash and also goodwill account is not to be raised, what adjustment entry should be passed?
  1. A's capital A/c Dr. $Rs. 37,500$

    B's Capital A/c Dr. $Rs. 12,500$

    To C's capital A/c $Rs. 50,000$
  2. C's Capital A/c Dr. $10,000$

    To A's capital A/c $Rs. 7,500$

    To B's capital A/c $Rs. 2,500$
  3. C's Capital A/c Dr. $Rs. 50,000$

    To A's capital A/c $37,500$

    To B's capital A/c $12,500$
  4. A's Capital A/c Dr. $7,500$

    B's capital A/c Dr. $2,500$

    To C's capital A/c $Rs. 10,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

C's share is 1/5. Total goodwill is 50,000, so C's share is 10,000. A and B sacrifice in their ratio 3:1. A sacrifices 10,000 * 3/4 = 7,500. B sacrifices 10,000 * 1/4 = 2,500. Entry: C's Capital Dr 10,000 to A 7,500 to B 2,500.

Multiple choice

The following particulars are available in respect of the business carried on by a partnership firm: Trading Results: $2011$ Loss Rs. $5,000$ $2012$ Loss Rs. $10,000$ $2013$ Profit Rs. $75,000$ $2014$ Profit Rs. $60,000$ You are required to compute the value of goodwill on the basis of $5$ years purchase of average profit.
  1. $Rs.1,25,000$
  2. $Rs.1,50,000$
  3. $Rs.10,000$
  4. $Rs.1,20,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total profit = -5000 - 10000 + 75000 + 60000 = 120000. Average profit = 120000 / 4 = 30000. Goodwill = 5 * 30000 = 150000.

Multiple choice

A & B shares profit & losses equally. They admit C as an equal partner and goodwill was valued as Rs.$30,000$ (book value NIL). C is to bring in Rs.$20,000$ as his capital and the necessary cash towards his share of Goodwill. Goodwill Account will not remain in the books. What will be the final effect of goodwill in the partner's capital account?
  1. A & B's account credited with Rs.$5,000$ each.
  2. All partner's account credited with Rs.$10,000$ each
  3. Only C's account credited with Rs.$10,000$ as cash bought in for goodwill

  4. Final effect will be nil in each partner
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a new partner brings goodwill, it is credited to the existing partners in their sacrificing ratio. Since C is an equal partner (1/3 share), A and B sacrifice equally. Goodwill 30,000 divided by 2 = 15,000 each? No, the total goodwill is 30,000, C's share is 1/3 * 30,000 = 10,000. This 10,000 is shared by A and B equally, so 5,000 each.

Multiple choice

Capital employed by a partnership firm is Rs. $1,00,000$. Its average profit is Rs. $20,000$. Normal rate of return is $15\%$. Value of goodwill.
  1. Rs. $33,333$
  2. Rs. $30,000$
  3. Rs. $23,333$
  4. Rs. $43,667$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Super profit = Average profit - (Normal rate * Capital employed) = 20,000 - (0.15 * 100,000) = 20,000 - 15,000 = 5,000. Goodwill is typically calculated as super profit multiplied by a number of years purchase, but since no years are given, the capitalized value of super profit is 5,000 / 0.15 = 33,333.

Multiple choice

A,B & C were equal partners with goodwill $Rs.1,20,000$ in the balance sheet and they agreed to take D as an equal partner on the term that he should bring $Rs.1,60,000$ as his capital and goodwill, his share of goodwill was evaluated at $Rs.60,000$ and the goodwill account is to be written off before admission. What will be the treatment for goodwill?
  1. Write off the goodwill of $Rs.1,20,000$ in old ratio.

  2. Cash brought in by D for goodwill will be distributed among old partners in sacrificing ratio.

  3. Both (A) & (B).

  4. None of the above.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a new partner is admitted, existing goodwill in the balance sheet is written off in the old profit-sharing ratio. New goodwill brought by the partner is distributed among old partners in the sacrificing ratio. Both actions are standard accounting procedures.

Multiple choice

A,B & C are equal partners. They decided to take D who brought in Rs.$36,000$ as goodwill. The new profit sharing ratio is $3:3:2:2$. The journal entry for goodwill will be- A Capital A/c Dr. B Capital A/c Dr. C Capital A/c Dr. To D Capital A/c $6,000$ $6,000$ $24,000$ $36,000$ Cash A/c Dr. To A Capital A/c To B Capital A/c To C Capital A/c $36,000$ $6,000$ $6,000$ $24,000$ Cash A/c Dr. To A Capital A/c To B Capital A/c To C Capital A/c $36,000$ $24,000$ $6,000$ $6,000$ Goodwill A/c Dr. To A Capital A/c To B Capital A/c To C Capital A/c $36,000$ $12,000$ $12,000$ $12,000$

  1. A

  2. B

  3. C

  4. D
Reveal answer Fill a bubble to check yourself
A Correct answer
Multiple choice

A & B are partners having capital of Rs.$29,000$ & Rs.$15,000$. Reserve shown in balance sheet was Rs.$10,000$. C is admitted as a new partner introducing a capital of Rs.$21,000$. New parofit sharing ratio is $5:3:2$. Profit on revaluation of assets & liabilities were Rs.$5,000$. C is to bring premium for goodwill in cash. Goodwill amount being calculated on the basis of C's share in the profits and capital contributed by him. Premium for goodwill to be brought in new partner C should be ________
  1. Rs.$30,000$
  2. Rs.$25,000$
  3. Rs.$15,000$
  4. Rs.$5,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice

X & Y share profits & losses as $1:2$. They agree to admit Z (who is also in business on his own) as a third partner. At the time of admission of Z goodwill was appearing in balance sheet at Rs.$14,000$ which was revalued at Rs.$18,000$. Z brings the following assets into the partnership: Goodwill- Rs.$6,000$ Furniture-Rs.$2,800$, Stock-Rs.$13,600$ After admission of Z, goodwill will appear at _______ in the balance sheet.
  1. Rs.$14,000$
  2. Rs.$18,000$
  3. Rs.$24,000$
  4. Rs.$26,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a new partner is admitted, the goodwill is revalued. The new value of goodwill (18,000) is brought into the books. However, the question asks for the value after admission, and the assets brought in include an additional 6,000 of goodwill. 18,000 + 6,000 = 24,000.