Partnership Accounts – Treatment of Goodwill in Partnership Accounts 0 Partnership Accounts - Treatment of Goodwill in Partnership Accounts 1 / 29 Q.30 When the incoming Partners does not being his part of Goodwill in cash which Account should be debited ? New Partner's Capital A/c Old Partner's Capital A/c Revaluation A/c Cash A/c 2 / 29 Q.29 A , B and C are partners sharing profit and losses in the ratio 3:2:1 .they admitted D into the firm, the New profit sharing ratio between them will be 3:3:2:2 ..The goodwill of the firm is valued at Rs.1,80,000.D brings his share of goodwill in cash. in this case A & B will be credited with Rs.6,000 & Rs.36,000 respectively C & D will be credited with Rs.36,000 & Rs.6,000 respectively A will be credited & D will be debited with Rs.36,000 None of these 3 / 29 Q.28 The net profits of a business,after providing for income tax for the last 5 years were: Rs.80,000,Rs.1,00,000,Rs.1,20,000,Rs.1,25,000 and Rs.2,00,000 respectively.The capital employed in the business is Rs.10,00,000 and the normal rate of return is 10%.calculate the value of the goodwill on the basis of the annuity method taking the present value of annuity of Re.1 for 5 years at 10% is 3.7907 Rs.84,768 Rs.95,768 Rs.94,768 Rs.60,000 4 / 29 Q.27 Find the goodwill of the firm using capitalization method from the following information: Total capital employed in the firm Rs.4,80,000.Rate of normal return-15%.Profit for the year Rs.90,000 Rs.4,20,000 Rs.3,11,000 Rs.1,20,000 Rs.2,20,000 5 / 29 Q.26 On 1st April,2011 on the admission of a new partner,it is a agreed that goodwill of the firm is valued at 2 years purchase of weighted average profits for the lase 3 years.The profits for last 3 years have been as follows. Year ended Profits Weight 31-03-2011 45,000 1 31-03-2012 52,500 2 31-03-2013 72,000 3 Value of goodwill will be_______ 1,22,000 2,22,000 1,22,222 1,20,000 6 / 29 Q.25 The profits of last 5 years Rs.60,000,Rs.67,500,Rs.52,500,Rs.75,000,Rs.60,000.Find the value of goodwill,If it is calculated on average profits of last 5 years on the basis of 3 years of purchase Rs.63,750 Rs.1,91,250 Rs.1,89,000 Rs.2,13,750 7 / 29 Q.24 In which of the following case the need for the valuation of goodwill in a firm may arise ? Admission of new partner While changing profit sharing ratio Retirement or death of partner All of the above 8 / 29 Q.22 When the incoming Partner brings his share of Goodwill in cash, it is adjusted by crediting to - His Capital A/c Goodwill A/c Old Partner's Capital A/c Cash A/c 9 / 29 Q.21 A and B shares profit and losses equally. They have Rs. 20,000 each as Capital. They admit C as equal partner and Goodwill was valued as Rs.3,000. C is to bring Rs.30,000 as his Capital and necessary cash towards his share of Goodwill. Goodwill A/c will not be remain open in books. If profit on revaluation is Rs. 13,000, find Closing balance of Capital Accounts. A - Rs.31,500 , B - Rs. 31,500, C - Rs.30,000 A - Rs. 31,500, B - Rs.31,500, C - Rs. 20,000 A - Rs. 26,500, B - Rs. 26,500 , C - Rs.30,000 A - Rs. 20,000 , B - Rs.20,000 , C - Rs. 30,000 10 / 29 Q.20 In the absence of any provision in the partnership agreement, profits and losses are shared In the ratio of capitals. Equally In the ratio of loans given by them to the partnership firm. 11 / 29 Q.19 The net profit after tax of Z & Co.for the past 5 years are as follows.Year Profit 2007-2008 2,56,0002008-2009 2,64,0002009-2010 3,76,0002010-2011 4,86,0002011-2012 5,30,500The capital employed is Rs.16,00,000.Rate of normal return is 15%.Calculate the value of the good will on the basis of annuity method on super profit basis,taking the present value of an anuuity of Re.1 for the 4 years at 15% as Rs.2.855. 7,65,000 8,67,800 5,70,000 4,06,838 12 / 29 Q.18 Which of the following formula is/are used for valuation goodwill under super profit basis ? Goodwill = Super profit x No of years purchases Goodwill = super profit x Annuity factor Goodwill = Super profit/capitalization x 100 Any of the above 13 / 29 Q.17 A and B are Partners sharing the profit in the ratio of 4:1. They take C as the new partner who is Supposed to bring Rs.25,000 as Capital and Rs. 10,000 as Goodwill. New profit sharing ratio is 1:1:1. C is able to bring only his share of Capital. Show the treatment in the Firm's books. A and B will be credited by Rs.8,000 and Rs.2,000 for Goodwill Goodwill be raised to Rs.30,000 by crediting A and B in old profit sharing ratio Both No adjustment required. 14 / 29 Q.16 When Goodwill is to written off after the admission of a partner in which ratio it is transferred to capital A/c of the Partners ? Sacrificing ratio Equally New profit sharing ratio Old profit sharing ratio 15 / 29 Q.15 Account which is debited when new Partner brings cash for his share of Goodwill - Revaluation Goodwill Capital Cash / Bank 16 / 29 Q.14 A , B and C are partners sharing profit and losses in the ratio 3:1:1 .they admitted D into the firm, the New profit sharing ratio between them will be 4:3:2:1 ..The goodwill of the firm is valued at Rs.3,00,000.D brings necessary amount as his share of goodwill . in this case A will be credited with Rs.60,000 A will be credited with Rs.30,000 B will be debited with Rs.60,000 D will be debited with Rs.60,000 17 / 29 Q.13 A and B are partners sharing profit and losses in the ratio 3:2 .they admitted C and agreed to give him 1/4 the of the profit . A & B. share profit & loss equally .The goodwill of the firm is valued at Rs.9,600.partners withdrew 50% of goodwill .A & B withdrew Rs.1,080 & Rs.120 Rs.2,160 & Rs.240 Rs.1.200 & Rs.1,200 Rs.600 & Rs.600 18 / 29 Q.12 A & B are sharing profits in the ratio of 3:1 .according to their partnership deed on reconstitution of a firm , 'goodwill is to be valued at two & half year's purchase of the average profit of the last three completed years .The profit were 2001-02 RS.20,000 ; 2002-2003 Rs.30,000 ; 2003-2004 Rs.40,000 ; 2004-2005 Rs.50,000 ; 2005-2006 Rs.60,000 . 'C ' is admitted for 1/5th share in profit on 31st march ,2006 the amount which C will be required to bring by way of his share of goodwill will be Rs.20,000 Rs.25,000 Rs.30,000 None of these 19 / 29 Q.11 Find goodwill from the following information:Capital employed -Rs.8,25,000.Rate of normal return-10%.Future maintainable profit-Rs.1,50,000.Annuity factor-Rs.3.17 4,75,500 2,61,525 3,13,975 2,13,975 20 / 29 Q.10 Which of the following factor generally contribute to the value of goodwill of a firm ? Efficiency of manegement Risk involved in the business Location of the business All of the above 21 / 29 Q.9 When new partner does not bring cash for goodwill, the goodwill is raised in the books of the new firm. TRUE FALSE 22 / 29 Q.8 If Goodwill A/c is written off from the books of the firm only old partners capital A/c are debited in the old ratio. TRUE FALSE 23 / 29 Q.7 When goodwill is withdrawn by the old partner in cash goodwill account is credited. TRUE FALSE 24 / 29 Q.6 Amount of goodwill contributed by the new partner is credited to capital account of the old partner in their new ratio. TRUE FALSE 25 / 29 Q.5 Goodwill is a tangible asset of the business. TRUE FALSE 26 / 29 Q.4 On admission of a partner, the amount of goodwill brought in cash is credited to goodwill account. TRUE FALSE 27 / 29 Q.3 When goodwill is written off, goodwill amount is debited to all partners capital account in new ratio. TRUE FALSE 28 / 29 Q.2 If the goodwill account is raised up, goodwill account is debited. TRUE FALSE 29 / 29 Q.1 When goodwill is paid privately, no entry in the books of a/c is required. TRUE FALSE Your score is LinkedIn Facebook Twitter VKontakte