countancy Class XII
Chapter Admission of a Partner

Q:1 Why should a new partner contribute for goodwill?

Q:2 A, B and C are in partnership sharing profits and losses in the ratio of 5:4:1 resp. Two new partners D and E are admitted. Profits are now to be shared in the ratio of 3:4:2:2:1 resp. D is to pay Rs 30,000 for his share of goodwill but E has insufficient cash to pay for goodwill. Both the new partners introduced Rs 40,000 each as their capital. Pass necessary journal entries.

Q:3 A & B are partners in a firm. They admit C as a partner with 1/4^th share in the profits of the firm. C brings Rs 2,00,000 as his share of capital. Value of Assets is Rs 5,40,000 and outside liabilities are valued at Rs 1,00,000 on that date. Give journal entries.

Q:4 Balance Sheet of X, and Y who share profits and losses in the ratio of 3:2 as at 31-3-2015 was:

Liabilities	Rs	Assets	Rs
Creditors   Reserve P& L A/c X’s Capital Y’s Capital	1,00,000    60,000    25,000    48,000   32,000	Bank Debtors Stock Furniture Plant & Machinery Advertisement Expenditure	10,000    50,000    70,000    20,000 1,00,000    15,000

                                                                                                    2,65,000                                   2,65,000

They admit Z as a partner from 1^st April, 2015 with 1/5^th share in the profits of the firm. Z brings in Rs 50,000 as his capital. Give Journal entry for adjustment of goodwill.

Q:5     A, B and C were partners in a firm sharing profits and losses in the ratio of 3:1:1. On 1^st April, 2015, their Balance Sheet stood as:

Liabilities	Rs	Assets	Rs
Creditors   General Reserve P& L A/c A’s Capital B’s Capital C’s Capital Invt Fluctuation Reserve      Workmen Compensation Reserve Employees Provident Fund	1,00,000    25,000    35,000  1,00,000    30,000    20,000    20,000    23,000    30,000	Current Assets Machinery Investment( market value Rs 28,000) Furniture Land & Building Advertisement Expenditure	1,18,000     50,000       30,000    10,000 1,50,000     25,000

                                                                                                  3,83,000                                                                                                                                                                                                      3,83,000

                                                                                            =========                            =========                                                                                                                                                                                 

They admitted D into partnership for 1/5^th share of profits on the above date. A claim on account of workmen compensation is estimated at Rs 13,000 only.

Q:6 A is admitted as a partner in ABC & Co, a partnership firm of B & C. The firm has reserves of Rs 75,000 and accumulated profits of Rs 1,00,000. At the time of admission, accountant distributed the reserves and accumulated profits to B and C in their profit sharing ratio. B was of the opinion that they should not be distributed because

i)                    There is no legal requirement

ii)                  Even if they are not distributed then also they will remain in the business and can be distributed whenever required at the time of retirement/death of the partner.

Do you agree? Give reasons.

Q:7 Murari and Vohra were partners in a firm with capitals of Rs 1,20,000 and Rs 1,60,000 resp. On 1^st April,2015 they admitted Yadav as a partner for 1/4^th share of goodwill.

On that date the creditors of the firm were Rs 60,000 and Bank overdraft was Rs 15,000. Their assets apart from cash included stock Rs 10,000; debtors Rs 40,000; Plant Rs 80,000; Land & Building Rs 2,00,000. It was agreed that stock should be depreciated by Rs 2,000; Plant by 20%, Rs 5,000 should be written as bad debt and land & building be appreciated by 25%.

Prepare Revaluation A/c, Capital A/cs and the Balance Sheet of the new firm.

Q: 8 Balance Sheet had Investment Fluctuation reserve of Rs 20,000. New partner is admitted. Value of investments is Rs 60,000 against its book value of Rs 80,000. What amount of Investment Fluctuation Reserve will be distributed among partners.

Q:9 A and B are partners in a firm. Their Balance Sheet as at 31^st March, 2015 was:

     

Liabilities	Rs	Assets	Rs
Creditors   Outstanding expenses A’s Capital B’s Capital Provision for doubtful debts  Workmen Compensation Reserve	30,000      3,000       50,000    60,000         4,000      5,600	Cash Machinery Debtors Stock Profit & Loss A/c	10,000    38,600    80,000    20,000      4,000

                                                                                                  1,52,600                                                                                                                                                                                                         1,52,600

                                                                                                ======                               ==========

On 1^st April, 2015, they admitted C as a new partner on the following conditions:

i)                    C brings in Rs 40,000 as his share of capital but he is unable to bring any amount for goodwill.

ii)                  The new ratio between A, B and C will be 3:2:1.

iii)                Claim on account of workmen compensation is Rs 3,000.

iv)                To write off bad debts amounting to Rs 6,000.

v)                  Creditors are to be paid Rs 2,000 more.

vi)                Rs 2,000 be provided for an unforeseen liability.

vii)              Outstanding expenses be brought down to Rs 1,200.

viii)            Goodwill is valued at 1-1/2years purchase of average profits of last three years, less Rs 12,000. The profits of last three years were Rs 10,000; 20,000; 30,000 resp.

Prepare Revaluation A/c, Capital A/c and the new Balance Sheet.

Q:10 X and Y are partners in a firm sharing profits in the ratio of 3:2. The remaining capitals of X and Y after adjustments are Rs 80,000 and 60,000 resp. They admit Z as a partner on his contribution of Rs 35,000 as capital for 1/5^th share to be acquired equally from both X and Y. The Capitals of the old partners are to be adjusted on the basis of the proportion of Z’s capital to his share in the business. Calculate the amount of actual cash to be paid off or brought in bt the old partners for the purpose.

Q:11  A and B are partners in a firm sharing profits in the ratio of 3:1 . they admitted K as a new partner for 3/8^th share . The new ratio will be 3:2:3. K brought rs 2,00,000 for his capital and Rs 50,000 for his share of goodwill. Their Balance Sheet as at 31^st March, 2015 was:

     

Liabilities	Rs	Assets	Rs
Creditors   Outstanding expenses A’s Capital B’s Capital	60,000    20,000    4,00,000 1,00,000	Cash Machinery Debtors Stock Furniture	90,000 2,10,000    80,000 1,50,000    50,000

                                                                                                                                                                                                                                                   5,80,000                                                      5,80,000

On 1^st April, 2015, they admitted C as a new partner on the following conditions:

i)                    Stock to be valued at Rs 2,00,000.

ii)                  Machinery will be depreciated by 12% and furniture by Rs 2,000.

iii)                A provision of 5% for bad and doubtful debts will be made on debtors.

iv)                The Capitals Accounts of all the partners were adjusted in the New ratio after admission. For surplus or deficiency, the Current Accounts were to be opened.

Prepare Revaluation Account, partner’s Capital A/c and the Balance Sheets.

Q:12 Why is there a need to revalue assets and liabilities at the time of admission of a partner?

Q:13 The Capitals of A and B were Rs 1,00,000 and Rs 2,00,000. A new partner, C is admitted for 1/5^th share. At that time Reserves existed in the books at Rs 40,000 and Revaluation profit was Rs 30,000. C brought Rs 10,000 for his share of goodwill premium. C has to bring in proportionate capital.    Calculate C’s Capital.

Q:14  The Capitals of A and B were Rs 1,00,000 and Rs 2,00,000. A new partner, C is admitted for 1/5^th share. At that time Reserves existed in the books at Rs 40,000 and Revaluation profit was Rs 30,000. C is unable to bring his share of goodwill premium of Rs 10,000.

Calculate the total amount C will bring to become a partner and pass necessary entries.

Q:15 The Capitals of A and B were Rs 4,00,000 and Rs 2,00,000. A new partner, C is admitted for 1/5^th share. At that time Reserves existed in the books at Rs 40,000 and Revaluation loss was Rs 30,000. C brought Rs 1,80,000 for capital but is unable to bring his share of goodwill premium of Rs 10,000.

Pass necessary journal entries at the C’s admission if capitals of the partners is to be adjusted on the basis of C’s proportionate capital contribution.

Q:16 Capitals of A, B and C as on 31-3-2015 were 36,000;44,000 and 52,000 resp. Goodwill appeared in the Balance Sheet at Rs 20,000 and P&L A/c credit balance was Rs 14,000. Revaluation loss amounted to Rs 11,100. D brings in Rs 36,000 towards 1/6^th share and partners to readjust their capital accounts on the basis of their profit sharing ratio. D is not in a position to bring in any amount for his share of goodwill. The adjustment of excess or deficit capital is to be made through Current accounts.

Pass the entry/entries regarding adjustment of capitals.