CBSE Class 12 Accountancy Admission of A Partner Worksheet Set A

Admission of a Partner Reference

MCQ Questions for NCERT CBSE Class 12 Accountancy Admission of A Partner

Question. Goodwill of the firm was valued on the basis of 2 years purchase of last three years average profits. The profits of last three years were: 5
During the year 2018-19, there was a loss of Rs.30,000 due to fire which was not accounted for while calculating the profit.
Calculate the Value of Goodwill.
(a) Rs.2,20,000
(b) Rs.2,40,000
(c) Rs.2,00,000
(d) None of the Above

Answer: A

Question. A and B shared profits in the ratio 2:3. With effect from 1st April,2021, they agreed to share profits equally. Goodwill of the firm was valued at Rs.60,000.The adjustment entry will be:
(a) Dr. B’s Capital A/C and Cr. A’s Capital A’/C by Rs.6,000
(b) Dr. A’s Capital A/C and Cr. B’s Capital A’/C by Rs.600
(c) Dr. A’s Capital A/C and Cr. B’s Capital A’/C by Rs.6,000
(d) Dr. B’s Capital A/C and Cr. A’s Capital A’/C by Rs.600

Answer: C

Question. Under the Capitalisation , the formula for calculating the goodwill is :
(a) Super profits multiplied by the rate of return.
(b) Average profits multiplied by the rate of return.
(c) Super profits divided by the rate of return.
(d) Average profits divided by the rate of return.

Answer : C

Question. Mohan and Sohan were partners in a firm with capitals of Rs.3,00,000 and Rs.2,00,000 respectively. Aditya was admitted as a new partner 1/4 th share in the profits of the firm. Aditya brought Rs.1,20,000 for his share of goodwill premium and Rs. 2,40,000 for his capital. The amount of goodwill premium credited to Mohan will be
(a) Rs.40,000
(b) Rs.30,000
(c) Rs.72,000
(d) Rs.60,000

Answer: D

Question. When Goodwill is not recorded in the books of the firm at all on Admission of a partner:
(a) If paid privately
(b) If brought in cash
(c) If not brought in Cash
(d) If brought in kind

Answer: A

Question. If the new partner brings his share of goodwill in Cash it will be shared by old partners in:
(a) Sacrificing Ratio
(b) Old-Profit-Sharing Ratio
(c)New-Profit-Sharing Ratio
(d)Capital Ratio

Answer: A

Question. Mohan and Shreya are partners in a firm dealing in stationery items. The firm is well managed and enjoys the advantage of being cost effective. The firm’s sales outlet is situated near a school. As a result, the firm has a steady demand of stationery items and is earning good profits.
Two factors affecting the value of Goodwill as highlighted in the above case are:
(a) Nature of Business and Market Situation
(b) Efficiency of Management and Location
(c) Location and Market Situation
(d) Efficiency of Management and Market Situation

Answer: B

Question. A business has earned average profits of Rs.1,00,000 during the last few years and the normal rate of return in a similar business is 10% per annum. Goodwill of the firm based on Capitalization of Average Profits is valued at Rs.1,80,000. The value of total assets of the business is Rs.10,00, 000.Its external liabilities are
(a) Rs.1,00,000
(b) Rs.80,000
(c) Rs.1,80,000
(d) NIL

Answer: C

Question. A and B are partners in a firm. They admit C with 1/5th share in the profits of the firm. C brings Rs.4,00,000 as his share of capital. Find the value of C’s share of Goodwill on the basis of his capital ,given that the combined capital of A and B after all Adjustments is Rs.10,00,000.
(a) Rs.6,00,000
(b) Rs.1,20,000
(c) Rs.1,50,000
(d) Rs.2,80,000

Answer: B

Question. According to which accounting standard goodwill is not recognized in books unless consideration is paid for it.
(a) AS-24
(b) AS-26
(c) AS-31
(d) AS-32

Answer: B

Question. Weighted Average profit method of calculating goodwill is used when
(a) Profit has increasing trend
(b) Profit has decreasing trend
(c) Both
(d) None of the above

Answer : C

Question. When goodwill existing in the books is written off at the time of admission of a partner, it is transferred to Partners ‘ capital Accounts in their
(a) Old profit sharing ratio
(b) New profit sharing ratio
(c) Sacrificing ratio
(d) Gaining ratio

Answer: A

Question. When the new partner brings cash for goodwill , the amount is credited to
(a) Revaluation Account
(b) Cash Account
(c) Premium for Goodwill Account
(d) Realisation Account

Answer : C

Question. X,Y and Z are in partnership sharing profits and losses in the ratio of 5:4:1. Two New partners A and B are admitted. Profits are to shared in the ratio of 3:4:2:2:1 respectively. A is to pay Rs.30,000 for his share of goodwill but E is unable to pay for goodwill. Calculate the the gain of Z.
(a) 12,000
(b) 15,000
(c) 16,000
(d) 20,000

Answer : A

Question. Which of the following statement is correct?
(a) Goodwill is a fictitious asset.
(b) Goodwill is a current asset.
(c) Goodwill is a wasting asset.
(d) Goodwill is an intangible asset.

Answer: D

Question. Why new partner needs to bring goodwill?
(a) To compensate the sacrificing partners
(b) For Revaluation Account
(c) For Revaluation of Assets
(d) For all of the above

Answer : A

Question. Assertion (A) : Purchased Goodwill is that Goodwill for which the firm has paid consideration in cash or kind and purchased Goodwill only is recorded in the books of accounts.
Reason (R) : Value of Goodwill is a subjective assessment but it is ascertained when both purchaser and seller agree to its valuation.
Choose the correct option from the following:
(a) Assertion and Reason both are correct and Reason is the correct.
(b) Assertion and Reason both are correct but Reason is not correct explanation of assertion.
(c) Only Assertion is correct.
(d) Reason is correct but Assertion is not correct.

Answer: A

Question. 8 Average profits of a firm during the last few years are Rs. 70,000 and normal rate of return in a similar business is 10%. If the goodwill of the firm is Rs.1,00,000 at 4 years’ purchase of super profit, find the capital employed by the firm.
(a) 5,00,000
(b) 4,00,000
(c) 4,50,000
(d) 6,00,000

Answer : C

Question. When Goodwill is not purchased goodwill account can
(a) Never be raised in the books.
(b) Be raised in the books.
(c) Be partially raised in the books.
(d) Be raised as per the agreement of the partners.

Answer : A

Question. Average profit of a business over the last five years were Rs.60,000. The normal rate of return on capital employed in such a business is estimated at 10% p.a. Capital invested in the business 4,00,000. Amount of goodwill, if it is based on 3 years’ purchase of last 5 years super profits will be
(a) Rs.1,00,000
(b) Rs.1,80,000
(c) Rs.60,000
(d) Rs.1,20,00060,000

Answer : C

Multiple Choice Questions

1 When a new partner brings his share of goodwill in cash, the amount is to be debited to:
(a) Premium A/c
(b) Cash A/c
( c) Capital A/cs of old partners
(d) Capital A/cs of new partner

2 A and B are partners sharing profits in equal ratio. A’s capital is ₹ 90,000 and B’s capital is ₹ 60,000. They admit C and agree to give 1/5th share in future profit, C brings ₹ 70,000 as his capital. Value of hidden goodwill at the time of admission of C is:
(a) ₹ 70,000
(b) ₹ 1,30,000
( c) ₹ 3,50,000
(d) ₹ 1,50,000

3 The new partner’s share of goodwill is taken by old partners in their:
(a) New profit sharing ratio
(b) Old profit sharing ratio
( c) Gaining ratio
(d) Sacrificing ratio

4 Revaluation Account is a
(a) Personal Account
(b) Real Account
( c) Nominal Account
(d) None of the above

5 X and Y are partners in a firm sharing profits and losses in the proportion of 2:1. They admit a new partner Z for 1/6 th share in profit. What is the new profit sharing ratio of X,Y and Z?
(a) 5:3:10
(b) 2:1:6
( c) 1:1:1
(d) 10:5:3

6 In case of Workmen Compensation Reserve, if the amount claimed is more than the amount lying in WCR, then the shortfall will be recorded in:
(a) Revaluation Account
(b) Partner’s Capital Account
( c) Balance Sheet
(d) None of these

7 State whether the following statements are true or false:
a) Payment of premium for Goodwill is the method of compensating sacrificing partners for the sacrifice they make in favour of new partner.

b) Contingent liability becoming a certain liability is credited to Revaluation Account at the time of admission of a partner.

c) On revaluation of assets and reassessment of liabilities, capital accounts of old partners remain unchanged.
d) At the time of admission of a partner, capital of partners cannot be adjusted on the basis of old partner’s capitals.
e) Employees Provident Fund is a liability and therefore it will not be distributed.

8 For any increase in the value of asset, the Revaluation Account is __________.

9 Investment Fluctuation Reserve is a reserve set aside out of profit to adjust the difference between __________ and __________ of investment.

10 If goodwill is appearing in the Balance Sheet at the time of admission of a new partner; the existing goodwill is written off among _________ partners in ________ ratio.

11 P and Q are in partnership sharing profits and losses in the ratio of 3:2 respectively. R joins the partnership for 25% share. Calculate the new profit sharing ratio and sacrificing ratio after R’s admission.

12 P and Q are in partnership sharing profits and losses in the ratio of 2:1 respectively. R joins the partnership for 1/5th share. Calculate the new profit sharing ratio and sacrificing ratio after R’s admission.

13 X and Y are in partnership sharing profits and losses in the ratio of 3:2. Z is admitted for 1/4th share. Afterwards W enters for 20%. Compute the profit sharing ratio of X, Y, Z and W after W’s admission

14 T and U are in partnership sharing profits and losses in the ratio of 2:1 respectively. V joins the partnership for 1/5th share and the share becomes 8:4:3. Calculate the Sacrificing Ratio. The new partner is physically challenged. State the value highlighted.

15 E and F are in partnership sharing profits and losses in the ratio of 3:2 respectively. R joins the partnership for 25% share and new ratio becomes 9:6:5. Calculate the sacrificing ratio.

16 A and B are partners sharing profits in the ratio of 3:2. A surrenders 1/6th of his share and B surrenders 1/4th of his share in favour of C, a new partner. What is the new ratio?

17 R and T are partners in a firm sharing profits in the ratio of 3:2. S joins the firm. R surrenders ¼th of his share and T 1/5^th of his share in favour of S. Find the new profit sharing ratio.

18 D and R are partners in a firm, sharing profits in the ratio of 7:3. They admit S for 3/7^th share of profits, which he takes 2/7^th from D and1/7th from R. Calculate their new profit sharing ratio.

19 A and B are partners in a firm, sharing profits in the ratio of 7:5. They admit C for 1/6^th share of profits, which he takes 1/24^th from A and 1/8th from B. Calculate the new profit sharing ratio.

20 A, B, C and D are in partnership sharing profits and losses in the ratio of 36:24:20:20 respectively. E joins the partnership for 1/5th share. A, B, C and D would share profits in future among themselves as 3:4:2:1. Calculate the new profit sharing ratio.

21 X and Y are partners in a firm sharing profits and losses in the ratio of 3:2. Z is admitted as partner with 1/8th share in profits. It is decided that X and Y will share profits and losses in future in the ratio of 4:3. Calculate the new profit sharing ratio. 22 X, Y and Z are partners in the ratio of 3:2:1. W is admitted with 1/6th share in profits. Z would retain his original share. Find out new profit sharing ratio.

23 Ram and Shyam share profits and losses in the ratio of 5:3. Bhushan is admitted for 3/10th share of profits half of which was gifted by Ram and the remaining share was taken by Z equally from Ram and Sham. Calculate the new ratio.

24 Ram and Shyam are partners in a firm sharing profits and losses in the ratio of 3:2. They admit Rahim as a partner for 1/5^th share. Rahim acquires his share from Ram and Shyam in the ratio 2:3. The goodwill stands in the books at ₹ 25,000. Rahim paid ₹ 15,000 privately to Ram and Shyam as his share of goodwill. Journalise.

25 Amit and Bablu are partners sharing profits in the ratio of 3:2. Chintu is admitted paying a premium for 1/4th share of profit of which he acquires 1/6^th from Amit and 1/12^th from bablu. Goodwill of the firm is valued at ₹ 8,400. Goodwill already appears in the books at ₹ 5,000. Partners withdrew 40% of goodwill credited to them. Give journal entries.

26 Raj and Nath are partners in a firm sharing profits in the ratio of 3:2. On 1^st April, 2017 they admit Singh as a new partner for 3/13th share in the profits. The new ratio will be 5:5:3. Singh contributed the following assets towards his capital and for his share of goodwill. Stock ₹1,00,000, Debtors ₹ 90,000, Land ₹ 70,000, Plant and Machinery ₹ 1,10,000. On the date of admission of Singh, the goodwill of the firm was valued at ₹ 6,50,000. Journalise in the books of the firm.

27 Ranvir and Seth are partners in a firm sharing profits and losses in the ratio of 3:2. They admit Zaman as a new partner for 1/5th of share as are between them. Ranvir and Seth decide to share future profits and losses in the ratio of 13:7. The goodwill of the firm is valued at ₹ 25,000. Goodwill already appears in the books at ₹ 20,000. Z brings in 60% of his requisite share of firm’s goodwill and ₹ 1,00,000 as his capital in cash. The amount of goodwill brought in cash is withdrawn by the concerned partners to the extent of 30% of what is credited to them. The profits for the first year of new partnership amounts to ₹ 50,000. Journalise.

28 A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They admit Z as a partner for 1/5^th share. Z acquires his share from A and B in the ratio of 2:3. The goodwill of the firm has been valued at ₹ 20,000. Z brings in ₹ 1,00,000 as his capital but is unable to bring in the necessary amount in cash as his share of firm’s goodwill. Pass journal entries under each of the following cases, assuming the capitals are fixed. :
Case (a) When no goodwill appears in the books.
Case (b) When goodwill appears in the books at ₹15,000

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