Wednesday, January 23, 2019

AHSEC Accountancy Question Bank: Admission of a Partner


Admission of a Partner

Calculation of New Ratio and Sacrifice/Gaining Ratio
1. A and B are two partners sharing profits and losses in the ratio of 3:2. C is admitted as a new partner for 1/5th share. Calculate new profit sharing ratio and sacrificing ratio.

2. A, B and C are partners sharing profits and losses in the ratio of 4:3:2. They admit D into partnership and the new profit sharing ratio of the old partners is agreed at 2:2:1 respectively. Calculate the gain or sacrifice of the partners.
3. A, B and C are partners sharing profits and losses in the ratio of 4:3:2. They admit D into partnership. A will retained his old share and the new profit sharing ratio of the remaining partners is agreed at 1:1 respectively. Calculate the gain or sacrifice of the partners.
4. A and B are two partners sharing profits and losses as 3:2. They admit C as a new partner for 1/5th share which he acquires from A and B in the ratio of 2:1. Calculate new profit sharing ratio and sacrificing ratio.
5. A and B are two partners sharing profits and losses as 3:2. They admit C as a new partner for 1/5th shares which he acquires entirely from A. Calculate new profit sharing ratio and sacrificing ratio.
6. A and B are two partners sharing profits and losses in the ratio of 3:2. They admit C as a new partner for 1/5th share of the future profit which he has acquired equally from A and B. Find new profit sharing ratio and sacrificing ratio.
7. A and B are two partners sharing profits and losses in the ratio of 3:2. C has admitted as a partner for 3/10th shares which he has acquired 2/10th from A and 1/10th from B. Calculate new profit sharing ratio and sacrificing ratio.
8. A and B are two partners sharing profits and losses in the ratio of 3:2. C has joined the firm as a new partner. A gives 1/4th of his share and B gives 1/5th of his share to the new partner. Find new profit sharing ratio.
9. A and B are two partners sharing profits and losses equally. They admit C as a new partner. A has surrendered 1/3rd of his share and B has surrendered 1/6th of his share in favour of C. Calculate new profit sharing ratio and sacrificing ratio.
Treatment of Goodwill in case of admission of a new partner
A. When premium for goodwill brought in cash by new partner
1. P and Q are partners sharing profits and losses in the ratio of 3: 2. The admit C into partnership, C paying a premium of Rs. 10,000 for 1/4th share of future profits. The new profit sharing ratio is 3: 3: 2. Goodwill is not appearing in the books of account. 50% premium money is withdrawn by the partners. Pass journal entries to record these transactions.

2. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C as new partner for 1/4th of the profit. C brings Rs. 20,000 as capital ad Rs. 5,000 as premium for goodwill. Give journal entries.
3. X and Y are partners sharing profits and losses in the ratio of 3:2. Z joints the firm as a new partner for 1/4th future profit. Z brings Rs. 20,000 as capital and required amount of premium. The goodwill of the firm was valued at Rs. 30,000. Give journal entries assuming that partner’s capitals are fixed.
4. A and B are partners sharing profits and losses in the ratio of 3:2. C is admitted as a new partner. He brings Rs. 20,000 as capital and Rs. 5,000 as premium for goodwill. The new profit sharing ratio is 2:2:1. Given journal entries assuming that partner’s capital are fluctuating.
5. A and B are partners sharing profits and losses in the ratio of 3:2. C joins the firm as a new partner. A gives 1/4th of his share and B gives 1/5th of his shares. He brings Rs. 25,000 as capital and Rs. 4,600 as premium for goodwill. Premium money is retained in the business. Given journal entries
6. A and B are partners sharing profits and losses in the ratio of 5:4. C is admitted for 1/3rd share of future profit. C takes 2/9th from A and 1/9th from B. C brings Rs. 30,000 as capital and Rs. 6,000 as premium for goodwill. Pass journal entries on C’s admission assuming that partner’s capitals are fixed.
7. A and B are partners sharing profits and losses in the ratio of 3: 2. C is admitted for 1/4th share. He brings Rs. 30,000 as capital and Rs. 5,000 as premium. As agreed between themselves, A and B decided to share profits and losses equally in future. Half of the premium money is withdrawn by old partners’ given journal entries on C’s admission assuming that partner’s capitals are fluctuating.
8. P and Q are partners sharing profits and losses in the ratio of 4:3. R joins the firm as a new partner for 2/5th share in future profit which he acquired equally from P and Q. He brings Rs. 25,000 as capital and proportionate amount of goodwill. The goodwill of the firm was valued at 3 years’ purchase of 4 years average profit. The profits for the last 4 years are Rs. 20,000, Rs. 22,000, Rs. 22,500 and Rs. 25,500. Give journal entries for R’s admission.
9. A and B are partners sharing profits and losses in the ratio of 2:1. C joins the firms as a new partner. He brings Rs. 20,000 as capital and Rs. 5,000 as premium for goodwill. The new profit sharing ratio is 3:3:2. Give journal entries assuming partners’ capitals are fluctuating.
10. A and B are partners sharing profits and losses in the ratio of 3:2. C is admitted for 1/6th share. C brings Rs. 20,000 as capital and Rs. 2,000 as a part of his share of goodwill. The goodwill of the firm was valued Rs. 24,000. Pass journal entries.
11. A and B are partners sharing profits and losses in the ratio of 3:2. C joins the firm as a new partner for 1/4th future profits. He brings Rs. 20,000 as capital and Rs. 5,000 as premium for goodwill. Goodwill already appears in the books at Rs. 10,000. Give journal entries.
12. A and B are partners sharing profits and losses as 2: 1. C and D are admitted and profit sharing ratio becomes 4: 2: 3: 1. Goodwill is valued at Rs. 30,000. D brings required amount for goodwill and LRs. 5,000 cash for capital. C brings in Rs. 5,000 cash and Rs. 6,000 worth of stock as his capital in addition to the required amount of goodwill in cash.  Show necessary journal entries.
13. X and Y are partners sharing profits and losses in the ratio of 3: 2. They admit Z into partnership. Z pays a premium of Rs. 15,000 for 1/4th share of future profits. The new profit sharing ratio is 3: 3: 2. Goodwill Account appears in the books at Rs. 15,000. Pass journal entries.
14. X and Y are in partnership sharing profits and losses in the ratio 5: 3. They admit Z into partnership and the new profit sharing ratio 4: 3: 3. Agreed value of goodwill is Rs. 22,000 but Goodwill Account appears in the books at Rs. 12,000. Z contributes Rs. 20,000 as capital and necessary amount of premium, half of which is retained in the business. Show the journal entries.
15. A, B and C are partners sharing profits and losses in the ratio of 3: 2: 1. Their respective capitals are Rs. 75,000, Rs. 50,000 and Rs. 25,000. D is admitted into the partnership for 1/6th share. It was agreed that he will bring Rs. 50,000 as capital and Rs. 25,000 as premium for goodwill. C should retain his original share. D paid in his capital money but in respect of premium he could bring only Rs. 12,500; you are required to: (i) give the journal entries to carry out the above arrangements; (ii) prepare Partners’ Capital Accounts; and (iii) calculate new profit sharing ratio.
16. Arun and Barun are partners in a firm sharing profits and losses in the ratio of 3: 2. Chanda is admitted as a new partner for 1/3rd of future profits and brings in case Rs. 50,000 as capital and Rs. 30,000 as premium for Goodwill. As between Arun and Barun they decided to share future profits and Losses equally. Calculate sacrificing ratio of Arun and Barun, also pass necessary Journal entries in the books of the firm.
When the new partner cannot bring premium for goodwill
1. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C as a new partner for 1/5th future profits. He brings Rs. 20,000 as capital but is unable to bring premium in cash which is Rs. 10,000. Give journal entries assuming capital is fixed.
2. X and Y are partners sharing profits and losses in 2:1. They admit Z as new partner for 1/5th share of future profits. Goodwill of the firm was valued at Rs. 30,000. Z brings Rs. 25,000 as capital but was unable to bring premium in cash. Give journal entries.
3. A and B are partners sharing profits and losses in the ratio 3: 2. They admit C as a partner, who is unable to bring goodwill in cash but pays Rs. 16,000 as his capital. Goodwill of the firm is valued at two years’ purchase of three years’ average profits. The profits for the three years were Rs. 10,000, Rs. 8,000 and Rs. 9,000. The new profit sharing ratio will be 1: 3: 1. Make journal entries.
4. A, B and C are partners sharing profits and losses in the ratio of 5: 4: 1 respectively. Two new partners are introduced, D and E. The profits are now to be shared in the ratio of 3: 4: 2: 2: 1 respectively. D is to pay in Rs. 30,000 for his share of the goodwill but E has insufficient cash to pay for goodwill. Both the new partners introduced Rs. 40,000 each as their capital. You are required to pass journal entries (no Goodwill Account is to be opened).
5. X and Y are partners sharing profits and losses in the ratio of 5: 3 and their capital on 1st March, 2004 were Rs. 15,000 and Rs. 10,000 respectively. On 1st March, 2004, they decided       to admit Z into partnership for one fourth share in future profit on condition that Z should bring in Rs. 16,000 as Capital in cash. He could not pay the goodwill amount is cash and goodwill of the firm valued at Rs. 9.600. Give Journal entries and prepare the combined Capital A/c of all the partners.
6. Akash and Bikash are partners in a partnership firm are the ratio of 2: 1. On 1st January, 2008 Chinmoy was admitted as a new partner. Chinmoy is to get 1/10th of future profits with a guaranteed minimum of Rs. 32,000. Akash and Bikash continue to share profits as before. The amount of profit for the year ended 31st December, 2008 amounted Rs.2, 00,000. Prepare Profit and Loss Appropriation Account of the firm for the year ended 31st December, 2008.
7. Ajoy, Bijoy and Chintu were partners sharing profits in the ratio of 3: 2: 1. On the occasion of Ajoy’s retirement, the building, creditors and stock of the firm were revalued at Rs. 90,000, Rs.        18,000 and Rs. 26,000 respectively. Book value of the building creditors and stock were Rs. 70,000, Rs. 20,000 and Rs. 30,000 respectively. Pass necessary Journal entries in the books of the firm for the above.
8. Arun, Barun and Tarun are in partnership business with capital of Rs. 70.000, Rs. 50,000 and Rs. 40,000 respectively. After providing interest on Capital at 8% p.a. they divide profit in the ratio of 3: 2: 1. Arun and Barun guaranteed that Tarun’s share of profit shall not be less than Rs. 12,000.The net profit for the year before providing interest on partners capital was Rs. 55,000. Prepare Profit and Loss appropriation account.
9. Boro and Kalita are partners sharing profit and losses in the ratio of 4 : 3. Limbu is admitted as a new partner. For Limbu’s admission goodwill of the firm is valued at Rs. 35,000. Limbu brings in Rs. 42,000 as capital but he could not bring his premium of goodwill. Boro, Kalita and Limbu will share future profit in the ratio of 2:2:1. Record the above transactions in the books of the firm.
10. A and B are partners sharing profits in the ratio of 5: 4. They admit C in the firm for 1/4th share of profit. C takes 3/16th from A and 1/16th form B. C brings in Rs. 25,000 as capital and Rs. 8,000 as premium for goodwill. The partners withdraw 40% of their respective share of premium. Pass the necessary Journal entries on C‘s admission.
Admission of a Partner – Preparation of Balance Sheet
Q.1. Joy shankar and Bimal were partners in a firm sharing Profits and Losses in the ratio of 2: 1. With capital of Rs. 60,000 and Rs. 30,000 respectively. They decided to admit Ashok into partnership on condition that he would bring in Rs. 20,000 as his capital and Rs. 6,000 for his share of goodwill for 1/5th share of profit. Half the amount of goodwill was withdrawn by the existing partners. The Capital of the partners in the new firm were to be arranged in profit sharing ratio or the basis of Ashok's capital and excess or deficit in capital to be adjusted by Cash. Give the necessary Journal entries to record the transaction and show the capital accounts of the partners.
Q.2. Bakul and Gakul were partners in a firm sharing profits and losses in the ratio of 2:1 with capitals of Rs. 40,000 and Rs. 30,000 respectively. They decided to admit Nakul into partnership on condition that he would bring in Rs. 20,000 as his capital and Rs. 6,000 for his share of goodwill for 1/4th share of profits. Half of the amount of goodwill was withdrawn by the existing partners. The capital of the partners in the new firm were to be arranged in profit sharing ratio on the basis of Nakul’s capital and excess or deficit capital to be adjusted in cash. Give the necessary Journal entries to record the transaction and show the capital accounts of the partners and the cash account.
Q.3. The following is the Balance Sheet of P and R on 1.1.2000. The partners share profits in the ratio 2:1. [H.S.’ 01]
Liabilities
Rs.
Assets
Rs.
Sundry Creditors
General Reserve
Capital Account :
    P = 20,000
    R = 15,000
15,000
5,000


35,000
Plant
Furniture
Sundry Debtors
Stock
Cash at Bank
15,000
12,000
10,000
12,000
6,000

55,000

55,000
The partners admit S into partnership for 40% share on the following conditions:
1. S will bring Rs. 20,000 as capital.
2. Assets re revalued as follows: Furniture to be reduced by Rs. 1,000. (b) Plant is to be depreciated by 10%. (c) A Provision of 5% to be raised against Sundry Debtors. (d) Stock to be appreciated to Rs. 12,500
3. Goodwill of the firm is valued at Rs. 6,000.
            Give journal entries and draw the Balance Sheet after the admission of S.            
Q.4. Jadu and Madhu share profits of a business in the ratio 2:1. The following was their Balance Sheet on 31st December, 2018. [H.S.’ 07]
Liabilities
Rs.
Assets
Rs.
Capital
    Jadu = 30,000
    Madhu = 20,000
Reserve
Creditors
Bills Payable


50,000
6,000
10,000
4,000
Machinery
Furniture
Cash
Debtors
Stock
20,000
10,000
9,000
21,000
10,000

70,000

70,000
On 1st January, 2006, Hari was admitted into the firm as a new partner on the following conditions:
a)      Hari will get 1/3rd of future profit.
b)      He will bring Rs. 20,000 as capital and Rs. 6,000 as premium for Goodwill.
c)      Partners will withdraw half of the premium money.
d)      Machinery is to be appreciated by 10%, stock to be reduced by Rs. 600 and Reserve for doubtful debts is to be credited at 5% on debtors.       
Q.5. X and Y share profits and losses in the ratio 2: 1. Their position on 31st December, 2002 was as follows: [H.S.;’04]                                
Balance Sheet of X and Y
Liabilities
Rs.
Assets
Rs.
Trade Creditors
Reserve
Capital A/c :
    X
    Y
2,450
650
9,700
5,200
Cash in hand
Trade Debtors
Stock in Trade
Furniture
Freehold property
Goodwill
1,900
7,850
4,600
450
2,200
1,000

18,000

18,000
It was decided to admit Z as a new partner for 1/8th of future profits on 1st January, 2003. Z shall bring Rs. 2,000 as his capital and Rs. 1,500 as his goodwill, to be retained in the business. At the time of Z’s admission it was decided to revalue the assets and liabilities as under: Freehold property Rs. 4,000 and Furniture Rs. 300. In addition to these, a provision for doubtful debts for Rs. 350 and a provision for outstanding expenses for Rs. 600 are to be made. Draft necessary Journal entries.
Q.6. A and B are partners of a firm sharing profits in the ratio of 3:1. The following is their Balance Sheet as on 31.12.2003:
Liabilities
Rs.
Assets
Rs.
Capital :
    A = 30,000
    B = 20,000
Reserve
Creditors


50,000
4,000
16,000
Fixed Assets
Stock
Debtors :            20,000
Less : Provision   1,000
Cash in hand
20,000
26,000

19,000
5,000

70,000

70,000
On 1st January, 2004. C is admitted into the firm as a new partner. He brings in Rs. 25,000 of which Rs. 5,000 is premium for goodwill. On C’s admission, fixed assets are revalued at Rs. 24,500 which provision for doubtful debts ins to be increased by Rs. 500. The new profit sharing ratio among the partners is 2:1:1. Capital of the new firm is to be adjusted on the basis of new partner’s capital.
Q.7. X and Y share profit and losses in the ratio of 2:1. Their position on 31st December 2002 was as follows: [AHSEC:  2004]
Balance Sheet X and Y

Rs.

Rs.
Trade Creditors
X’s Capital
Y’s Capital
2,450
9,700
5,200
Cash in hand
Trade Debtors
Stock in Trade
Furniture
Freehold Property
1,250
7,850
4,600
450
3,200

17,350

17,350
It was decided to admit Z as a new partner for 1/8th of future profits on 1st January, 2003. Z shall bring Rs. 2,000 as his capital and Rs. 1,500 as his goodwill, to be retained in the business. At the time of Z’s admission it was decided to revalue the assets and liabilities as under: Freehold Property Rs. 4,000; Furniture Rs. 300. In addition to these, a provision for doubtful debts for Rs. 350 and a provision for outstanding expenses of Rs. 600 are to be made. Draft necessary Journal entries.                 
Q.8. Following is the Balance Sheet on 31st December, 1990 of Sushil and Satish who are in partnership sharing profits and losses in the ratio 3: 2 respectively.  [A.H.S.E.C – 1991]
Balance Sheet as on 31.12.90
Liabilities
Rs.
Assets
Rs.
Creditors
Provident Fund
Capital Account
    Sushil                    25,000
    Satish                     9,000

10,000
8,400


34,000
Freehold Premises
Machinery
Stock
Debtors                     22,500
Less: Provision           4,000
Bank Balance
10,000
5,400
12,500

18,500
6,000

52,400

52,400
They admit Samir into partnership with effect from 1st January, 1991 on the following conditions:
a)      Samir is to bring in Rs. 6,000 as capital and Rs. 4,800 for two-sevenths share of goodwill, both the sums remaining in the business.
b)      Freehold premises have been revalued at Rs. 15,000. Stock is to be discounted at 10% and provision for doubtful debts to be reduced by Rs. 1,000.
Pass Journal Entries in the books of the firm to record the transaction relating to Samir’s admission and prepare the balance sheet of Sushil, Satish, and Samir on 1st January, 1991.                      
Q.9. Ram and Shyam share profits of a business in the ratio of 2: 1. They admit Rahim into the firm for ¼ shares in the profits. On the date of admission of Rahim, the Balance Sheet of the firm was as follows:  [A.H.S.E.C – 1999]
Liabilities
Rs.
Assets
Rs.
Capital:
    Ram   
    Shyam
Reserve
Creditors   

30,000
20,000
6,000
10,000
Machinery
Furniture
Stock
Debtors
Cash
20,000
10,000
15,000
16,000
5,000

66,000

66,000
Terms of Rahim’s admission were as follows:
a)      Rahim will bring Rs. 20,000 as capital and 6,000 as premium for goodwill.
b)      Partners will withdraw half of the premium money.
c)      Machinery is to be appreciated by 10% stock is to be reduced by Rs. 600 and reserve for doubtful debts is to be created at 5% on debtors. Give journal entries and prepare Balance Sheet after Rahim’s admission.     
Q.10. Milu and Nilu are partners in a firm sharing profits and losses in the ratio of 3:1. Their Balance Sheet as on 1st April, 2006 was as follows:                        [A.H.S.E.C – 1993]
Liabilities
Rs.
Assets
Rs.
Sundry Creditors
Reserve Fund
Capital:
    Milu: 30,000
    Nilu : 24,000
12,000
9,000


54,000
Cash at Bank
Goodwill
Sundry Assets
6,000
12,000
57,000

75,000

75,000
On this date, Pilu was admitted as a partner. He paid Rs. 30,000 towards his capital but was unable to bring his share of goodwill of Rs. 6,000 in cash. The new profit sharing ratio is 3:3:2. Pass journal entries in the books of the firm and show the capital accounts of the partners and Balance Sheet of the new firm.   
Q.11. Mina and Nina were partners sharing profits and losses in the ratio of 2: 1. Their Balance Sheet as on 1st June, 1996 was as follows:      [A.H.S.E.C – 1997]
Balance Sheet of Mina and Nina as on 1 – 6 – 1996
Liabilities
Rs.
Assets
Rs.
Capital:
    Mina                30,000
    Nina                 24,000
Reserve Fund
Sundry Creditors
Bills Payable
Investment fluctuation fund


54,000
3,000
12,000
3,000
3,000
Goodwill
Sundry Assets
Cash at Bank
Investments
12,000
40,000
6,000
17,000

73,000

75,000
On that date, Lina was admitted as a new partner. Lina paid Rs. 30,000 towards her Capital but was unable to pay anything for goodwill in cash. It was agreed that the goodwill will be valued at Rs. 21,000 for the purpose of admission. The new profit sharing ratio among Mina, Nina and Lina was 3:2:1 respectively. Investment is valued at Rs. 16,000. Pass journal entries to record the above transactions and show the Balance Sheet of the new firm.
Q.12. Bose and Das are partners in a firm. Their Balance Sheet as on 31st March, 1997 was as follows:
Liabilities
Rs.
Assets
Rs.
Creditors
Bills Payable
Capital Accounts:
          Bose
          Das
3,000
3,000
1,200
4,500
3,000
Cash
Debtors
Stock
Furniture
Machinery
1,800
4,500
4,200
1,200
3,000

14,700

14,700
On that date they decided to admit Mishra into partnership on the following terms:
a)      That Mishra was to bring in Rs. 3,000 as premium for goodwill for 1/5th share in the future profits;
b)      That furniture was valued at Rs. 700;
c)      That Rs. 500 of the debtors is written off as irrecoverable debt and a 10% provision be made for doubtful debts.
d)      Investments worth Rs. 1,200 were to be taken into account.
e)      That Mishra was to bring in capital to the extent of his share of the total capital in the firm after adjustments.
Pass Journal entries to record the necessary adjustments for the admission of Mishra and prepare the opening Balance Sheet of the firm.

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