Class 12 Reconstitution of a Partnership Firm - Admission of a Partner Mock Test (CBSE)

Topics in Reconstitution of a Partnership Firm - Admission of a Partner

• Modes of reconstitution of a partnership firm
• Admission of a new partner
• New profit sharing ratio
• Sacrificing ratio
• Goodwill: nature and factors affecting it
• Methods of valuation of goodwill
• Treatment of goodwill
• Adjustment for accumulated profits and losses
• Revaluation of assets and reassessment of liabilities
• Adjustment of capitals
• Change in profit sharing ratio among existing partners

Reconstitution of a Partnership Firm - Admission of a Partner practice questions with answers

1. Q1Multiple choice·1 mark
   At the time of admission of a new partner, an unrecorded asset of $\text{Rs. } 12,000$ was brought into the books of accounts. Which of the following journal entries is correct for recording this?

   1. (a)Revaluation Account ... Dr. To Unrecorded Asset Account
   2. (b)Unrecorded Asset Account ... Dr. To Revaluation Account
   3. (c)Cash Account ... Dr. To Revaluation Account
   4. (d)Old Partners' Capital Accounts ... Dr. To Unrecorded Asset Account
   Show answer and step marks

   1. Correct option: (b) Unrecorded Asset Account ... Dr. To Revaluation Account. An unrecorded asset is a gain for the firm upon admission, so the asset account is debited and the Revaluation Account is credited.+1

   Answer: (b)
2. Q2Multiple choice·1 mark
   X and Y are partners sharing profits in the ratio of $3:2$. They admit Z as a new partner. On the date of admission, the Balance Sheet shows a General Reserve balance of $\text{Rs. } 50,000$. How is this reserve treated at the time of Z's admission?

   1. (a)Credited to X and Y in their old profit sharing ratio of $3:2$
   2. (b)Debited to X and Y in their old profit sharing ratio of $3:2$
   3. (c)Credited to all partners including Z in the new profit sharing ratio
   4. (d)Credited to X and Y in equal ratio
   Show answer and step marks

   1. Correct option: (a) Credited to X and Y in their old profit sharing ratio of $3:2$. Accumulated profits like General Reserve belong to the old partners and are transferred to their capital accounts in their old profit sharing ratio.+1

   Answer: (a)
3. Q3Short answer·2 marks
   A and B are partners sharing profits in the ratio of $3:2$. They admit C as a new partner for $\frac{1}{5}^{\text{th}}$ share in the profits. C brings $\text{Rs. } 40,000$ as his capital. After all adjustments, the adjusted capitals of A and B are $\text{Rs. } 90,000$ and $\text{Rs. } 60,000$ respectively. Calculate the required capitals of A and B based on C's capital if their capitals are to be adjusted in the new profit-sharing ratio.
   Show answer and step marks

   1. Total capital of the new firm based on C's capital for $\frac{1}{5}$ share: $\text{Rs. } 40,000 \times 5 = \text{Rs. } 2,00,000$.+1
   2. A's required capital (new ratio $12:8:5$): $\text{Rs. } 2,00,000 \times \frac{12}{25} = \text{Rs. } 96,000$.+0.5
   3. B's required capital: $\text{Rs. } 2,00,000 \times \frac{8}{25} = \text{Rs. } 64,000$.+0.5

   Answer: A's required capital = Rs. 96,000; B's required capital = Rs. 64,000
4. Q4Short answer·3 marks
   A, B and C were partners sharing profits and losses in the ratio of $5 : 3 : 2$. With effect from $1^{st}$ April 2024, they decided to share future profits and losses in the ratio of $2 : 3 : 5$. Calculate each partner's sacrificing or gaining ratio due to the change in profit-sharing ratio.
   Show answer and step marks

   1. Formula: Sacrifice or gain = Old share − New share (positive = sacrifice, negative = gain).+0.5
   2. A: $\frac{5}{10} - \frac{2}{10} = \frac{3}{10}$ (sacrifice).+1
   3. B: $\frac{3}{10} - \frac{3}{10} = 0$ (neither sacrifice nor gain).+0.5
   4. C: $\frac{2}{10} - \frac{5}{10} = -\frac{3}{10}$ (gain of $\frac{3}{10}$).+1

   Answer: Partner A sacrifices $3/10$, Partner C gains $3/10$, and Partner B has no change.
5. Q5Long answer·5 marks
   P and Q are partners sharing profits in the ratio $3:2$. They admit R into the firm, and the new profit sharing ratio among P, Q and R is $5:3:2$. R acquires his share of profit entirely from P and Q. The goodwill of the firm is valued at ₹1,00,000, but no goodwill account appears in the books of the firm. Identify the sacrificing ratio of P and Q, state the amount R must bring in for goodwill, and pass the necessary journal entry for the treatment of goodwill on R's admission.
   Show answer and step marks

   1. P's sacrifice = old share $-$ new share $= \frac{3}{5} - \frac{5}{10} = \frac{1}{10}$+1
   2. Q's sacrifice = old share $-$ new share $= \frac{2}{5} - \frac{3}{10} = \frac{1}{10}$+1
   3. Sacrificing ratio of P and Q $= \frac{1}{10} : \frac{1}{10} = 1:1$+0.5
   4. R's share of goodwill $= \frac{1}{5} \times ₹1{,}00{,}000 = ₹20{,}000$, brought in cash by R+1
   5. Journal entry: Bank A/c Dr. ₹20,000 To P's Capital A/c ₹10,000 To Q's Capital A/c ₹10,000 (goodwill credited to the sacrificing partners in their sacrificing ratio $1:1$)+1.5

   Answer: Sacrificing ratio of P and Q is $1:1$; R brings ₹20,000 for goodwill; Journal entry: Bank A/c Dr. 20,000 To P's Capital A/c 10,000 To Q's Capital A/c 10,000.

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