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2nd Year Principles of Accounting Chapter 7 Test

2nd Year · Principles of Accounting · Punjab (PTB)

Name: ____________Roll No: ________Class/Section: ________Date: ________Total marks: 30Time: 40 minutes

Q1. Multiple choice questions (Attempt all · 10 × 1 = 10)

X,Y and Z are partners in a firm, if B is to be admitted as a new partner:
1. Old partnership has to be dissolved
2. Old firm has to be dissolved
3. Both old firm and partnership have to be dissolved
4. Neither firm nor partnership needs to be dissolved
Old profit sharing ratio minus new profit sharing ratio is equal to:
1. Sacrificing ratio
2. Gaining ratio
3. Distributing ratio
4. None of these
On the admission of a new partner in partnership:
1. Old partnership has to be dissolved
2. Old firm has to be dissolved
3. “a” and “b”
4. None of the above
X and Y are sharing profits in the ratio of 4:3, Z joins and the new ratio among X,Y and Z is 7:4:3, the sacrificing ratio between X and Y will be:
1. Equal
2. 4:3
3. 2:1
4. 1:2
A business running into losses will have generally no:
1. Machinery
2. Sundry debtors
3. Sundry creditors
4. Goodwill
A and B are partner 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 Rs.8,000 for his share of goodwill, A and B will be credited by:
1. Rs.5,000 and Rs3,000 respectively
2. Rs 6,000 and Rs.2,000 respectively
3. Rs.4,000 each
4. Rs.5,000 each
A new partner may be admitted to a partnership:
1. With the consent of all the old partners
2. With the consent of any one of the partners
3. With the consent of two third of the old partners
4. Without consent of old partners
The decrease in the value of building, stock on the admission of a partner should be debited to:
1. Building account
2. Stock account
3. “a” and “b”
4. Revaluation a/c
Goodwill is an:
1. Expense
2. Profit
3. Asset
4. Liability
When goodwill brought in cash by a new partner, the entry will be:
1. Cash account …Dr To goodwill account
2. Goodwill account …Dr To cash account
3. Goodwill account …Dr To old partners’ capital accounts
4. No entry

Q2. Short questions (Attempt any 6 of 8 · 6 × 2 = 12)

What is premium method for the treatment of goodwill on the admission of a new partner?
What is memorandum revaluation method for the treatment of goodwill on the admission of a new partner?
Why the necessity of the valuation of goodwill arises?
What is revaluation method for the treatment of goodwill on the admission of a new partner?
Distinguish between revaluation account and memorandum revaluation account.
Write the three factors which are responsible for the goodwill of a business.
Suppose the average profit is Rs.8000 and the reasonable return is 10% the value of net assets is Rs.50,000.
What is revaluation account?

Q3. Long questions (Attempt any 2 of 3 · 2 × 4 = 8)

Zufiqar and Fayyaz are partners in a firm sharing profits and losses as Zulfiqar 3/4 and Fayyaz 1/4 on 1^st January, 2022, their positions was as given below:

Assets	Rs.	Liabilities	Rs.
Plant	80,000	Capital accounts:
Stock	20,000	Zulfiqar 100,000
Debtors	60,000	Fayyaz 60,000	80,000
Cash at bank	40,000	Sundry creditors	40,000
	200,000		200,000

Riaz is now to join the partnership. He agrees to pay the partners Rs.40,000 by way of goodwill and introduce 3/5 of the combined capital of the two existing partners after depreciating plant and stock at 20% and 10% respectively and raising a reserve of 10% against Sundry Debtors. The new partner is to be allowed 1/4^th share of the profits of the firm.
You are asked to record the above transactions in the books of the firm and give the resultant balance sheet of the new firm.

Mukhtar and Munir were partners in a firm sharing profits equally. Their business position as on 31^st June 2022 was as follows:

Balance Sheet
Assets	Rs.	Liabilities	Rs.
Cash in hand	300	Sundry creditors	12000
Stock	7200	Bank overdraft	3000
Sundry debtors	12400	Mukhtar’s capital	4200
Furniture	1200	Munir’s capital	3200
Investments	1300
	22,400		22,400

It is agreed to take Mobeen into partnership and to make the following adjustments:
(1) Bad debts to be written off for Rs. 3,200.
(2) Value of the furniture to be reduced to Rs. 800.
(3) Depreciate stock at 10%.
(4) Write of 20% on investments.
(5) Raise goodwill for Rs. 2,000.
Mobeen introduced Rs. 2,000 as capital for his 1/3 share. Other partners’ capitals should be adjusted according to the new partner’s capital.
Pass necessary journal entries and prepare the balance sheet of the new firm.

A and B are partners in a firm sharing profits and losses as 5:3. The position of the firm as on 31^st March 2022 is as follows:

Assets	Rs.	Liabilities	Rs.
Plants & Machinery	80,000	Capital accounts:
Stock	60,000	A 60,000
Sundry debtors	40,000	B 40,000	100,000
Bills receivable	20,000	Sundry creditors	30,000
Cash at bank	15,000	Bank overdrafts	85,000
	215,000		215,000

C now joins them on condition that he will share 3/4^th of the future profits, the balance of profits being shared by A and B as 5:3. He introduced Rs. 80,000 by way of capital in cash and pays off the overdraft. He also pays Rs. 8,000 by way of premium for goodwill of the business and this amount is to remain in business. The partners agree to depreciate plant by 10% and raise a reserve against sundry debtors by 5%.
You are asked to journalise the entries in the books of the firm and the resultant balance sheet and also show how will the partners share future profits.