Question by CA (Dr.) G.S.GREWAL, Series – 21

True/False

  1. P, Q and R are partners sharing profits in the ratio of 5 : 4 : 3. Q retires and P and R decide to share future profits equally. Gaining Raito will be 1 : 3.

Fill in the Blank

  1. On the death of partner, the amount due to him will be credited to ______________.

Multiple Choice Question

  1. Raja, Mohan, Roy are partners in a firm sharing profits and losses in the ratio of 4 : 3 :1. As per the terms of Partnership Deed on the death of any partner, Goodwill was to be valued at 50% of the net profits credited to that Partner’s Capital Account during the last three completed years before her death. Raja died on 28th February, 2019. The profits for the last five years were 2014 – ₹ 60,000; 2015 – ₹ 97,000; 2016 – ₹ 1,05,000; 2017 – ₹ 30,000 and 2018 – ₹ 84,000. On the date of Raja’s death. Calculate the amount of Raja’s share of Goodwill in the firm The new profit-sharing ratio between Mohan and Roy will be equal.

(a) ₹ 1,09,500

(b) ₹ 27,375

(c) ₹ 54,750

(d) ₹ 73,000

Answer – Question by CA (Dr.) G.S.GREWAL Series – 21

True/False

  1. True

Reason: Old profit sharing Ratio among P,Q and R is 5:4:3

Q retires and P and R decides to share profit equally

Gaining Ratio = 1/2-5/12

P’s share = (6 – 5)/12=1/12

R’s share = 1/2-3/12

= (6 – 3)/12=3/12

Gaining Ratio = 1:3.

Fill in the Blank

  1. His Executor’s Account.

Reason: The death of partner, the amount due to him will be credited to His Executor’s Account on his legal heir.

Multiple Choice Question

  1. (b)

Reason: Sum of Profit of last three completed years = ₹ 1,05,000+₹ 30,000+₹ 84,000 = ₹ 2,19,000

Raja’s Share is 4/8 i.e., ½ of ₹ 2,19,000 = ₹ 1,09,500

50% of ₹ 1,09,500 = ₹ 54,750

Raja’s share is 50% of net profit = ₹ 27,375.

Question by CA (Dr.) G.S.GREWAL, Series – 22

True/False

  1. Anurag, Sanjeev and Sumit are partners sharing profit or loss in the ratio of 2 : 3 : 4. Anurag retires and after Anurag’s retirements Sanjeev and Sumit agreed to share profit or loss in the ratio of 3 : 4 in future. Their gaining ratio will be 4 : 3.

Fill in the Blank

  1. Retiring partner is compensated for foregoing his share in future profits in favour of remaining partners or continuing partners. The compensation so paid is _______________.

Multiple Choice Question

  1. P, Q and R have been sharing profits in the ratio of 8 : 5 : 3.P retires. Q takes 3/16th share from P and R takes 5/16th share from P. New profit sharing ratio will be :
  2. 1 : 1
  3. 10 : 6
  4. 9 : 7
  5. 5 : 3

Answer – Question by CA (Dr.) G.S.GREWAL, Series – 22

True/False

  1. False

Reason: Old Profit sharing ratio among Anurag, Sanjeev and Sumit = 2:3:4

Anurag retires from the firm.

New profit sharing ratio between Sanjeev and Sumit = 3:4

Gaining Ratio = New Ratio – Old Ratio

Sanjeev’s Gain = 3/7-3/9

= (27-21)/63=6/63

Sumit’s Gain = 4/7-4/9

= (36-28)/63=8/63

Gaining Ratio = 6:8.

= 3:4.

Fill in the Blank

  1. Gaining Ratio

Reason: The remaining partner compensate the retiring partner in gaining ratio i.e., New ratio – Old Ratio.

Multiple Choice Question

  1. (a)

Reason: Old profit sharing ratio among P,Q and R is 8:5:3

Q retires from the firm and his share is taken by P and R.

P’s share = 8/16

Q’s new share = 5/16+3/16=8/16

R’s new share = 3/16+5/16=8/16

New Profit sharing Ratio = 8:8

Between Q and R = 1:1.

Question by CA (Dr.) G.S.GREWAL, Series – 32

True/False

  1. Profit or Loss of Revaluation Account is transferred to Partners Capital Accounts of all partners (including retired or deceased partner) in their profit – sharing ratio at the time of retirement or death of a partner.

Fill in the Blank

  1. Decrease in assets at the time of retirement of a partner is _____________ to Revaluation Account.

Multiple Choice Question

  1. A, B and C were partners sharing profits in the ratio of 4 : 5 : 3, C retired and continuing partners decided to share future profits in the ratio of 7:8. Gaining ratio will be:

(a) 8 : 7

(b) 4 : 5

(c) 1 : 1

(d) 2 : 1

Answer – Question by CA (Dr.) G.S.GREWAL, Series – 32

True/False

  1. True

Reason: Profit or loss that arises before the retirement or death of a partner is shared by all the partners in their profit – sharing ratio because it had arisen before the partner retired or died.

Fill in the Blank

  1. debited

Multiple Choice Question

  1. (a)

Reason: Gaining Ratio = New profit – sharing ratio – Old profit – sharing ratio. Gaining Ratio is 8 : 7 calculated as follows:

A   B

(i) New Profit – sharing Ratio    7/15 8/15

(ii) Old Profit – sharing Ratio  4/12 5/12

Gaining Ratio (i) – (ii)         8/60 7/60

Question by CA (Dr.) G.S.GREWAL, Series – 42

True/False

  1. Increase in the value of assets and unrecorded assets being recorded at the time of retirement or death of a partner is debited to Revaluation Account.

Fill in the Blank

  1. Goodwill may be recorded in the books of account only when consideration is paid in _________ or ___________.

Multiple Choice Question

  1. B and C were partners sharing profits in the ratio 2 : 2 : 1, having capital accounts as ₹ 50,000, ₹ 50,000 and ₹ 25,000, respectively. B retired. On that date, balance in General Reserve was ₹ 15,000. If firm’s Goodwill is valued at ₹ 30,000 and Gain (profit) on Revaluation is ₹ 7,050, amount payable to B will be:

(a)     ₹ 50,820

(b)     ₹ 70,820

(c)     ₹   8,820

(d)     ₹   9,000

Answer – Question by CA (Dr.) G.S.GREWAL, Series – 42

  1. False

Reason: Increase in the value of asset or unrecorded asset being recorded is credited to Revaluation Account because increase in asset means Asset Account shall be debited and Revaluation Account shall be credited. It is a gain (profit) for the firm. Journal entry for increasing assets is:

Asset A/c                                  …Dr.

To Revaluation A/c

Correct Statement: Increase in the value of assets and unrecorded assets being recorded at the time of retirement or death of a partner is credited to Revaluation Account.

  1. money, money’s worth
  1. (b)

Reason: Amount payable to B will be ₹ 70,820 calculated as follows:

Balance in Capital Account                                         ₹ 50,000

Share of General Reserve                                                          ₹   6,000

Share of Revaluation Gain (Profit)                                       ₹   2,820

Share of Goodwill                                                                  ₹ 12,000

Total                                                                                   ₹ 70,820

Question by CA. (Dr.) G. S. GREWAL – Series 47

True / False

  1. Decrease in the value of assets at the time of retirement of a partner is credited to Revaluation Account.

Fill in the Blank

  1. In the event of death of a partner, the amount of General Reserve is transferred to Partners’ Capital Account, including deceased partner, in their _________ because it was set aside out of profits when __________________ was also a partner.

Multiple Choice Question

  1. A, B and C were partners sharing profits in the ratio 3 : 2 : 1. C retired, if A and B take share of retiring partner equally, New profit – sharing ratio will be:

(a)     7 : 5

(b)     3 : 2

(c)     1 : 1

(d)     2 : 1

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 47

  1. False

Reason: Decrease in the value is debited to Realisation Account because decrease means loss to the firm. Asset will be reduced by the amount of decrease in value of that asset. Journal entry for increasing liability is:

Revaluation A/c                                   …Dr.

To Asset A/c

Correct Statement: Decrease in value of assets at the time of retirement of a partner is debited to Revaluation Account.

  1. Old profit – sharing ratio, deceased partner
  2. (a)

Reason: New profit – sharing  ratio will be 7 : 5 calculated as follows:

A                          B

(i)      Old Profit – sharing Ratio                            3/6                        2/6

(ii)      Share of C acquired                                   ½ of 1                            ½ of 1

i.e.,                                                    1/12                      1/12

New Profit – sharing Ratio                          7/12                      5/12

or                                                            7           :         5

Question by CA. (Dr.) G. S. GREWAL – Series 51

True/False

  1. The amount due to deceased partner is paid to his executor.

Fill in the Blank

  1. A , B and C were partners, B retired from the firm. On the date of his retirement Stock, Sundry Debtors and Provisions for Doubtful Debts were ₹50,000, ₹45,000 and ₹4,500 respectively. The partners decided to reduce the value of stock to 90%. The journal entry passed will be

…………..                         Dr.                      ₹ 5,000

To …………….                                                          ₹5,000

Multiple Choice Question

  1. A, B, C and D were partners sharing profits and losses in the ratio 18 : 15 : 18 : 3, D retired and his share of profits is taken by the remaining partners A, B and C as 1/54, 1/54 and 1/54. The gaining ratio will be:

(a) 1 : 1 : 1

(b) 6 : 9 : 1

(c) 2 : 1 : 1

(d) 2 : 2 : 1

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 51

  1. True

Reason: As a result of death of a partner, payment of amount due to him cannot be made not being a living person. His legal heirs become entitled to his estate. Therefore, the payment is made to legal heirs of the deceased partners.

  1. Revaluation A/c, Stock A/c
  2. (a)

Reason: Gaining Ratio = New Profit – sharing Ratio – Old Profit – sharing Ratio. However, in the present question Gaining Ratio is already given to be 1:1:1.

 

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