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All questions of Unit 4: Retirement of a Partner for CA Foundation Exam
A, B, and C are partners with capitals of Rs. 1,00,000, Rs. 75,000 and Rs. 50,000. On C’s retirement his share is acquired by A and B in the ration of 6:4. Gaining ratio will be:- a)3:2
- b)2:2
- c)2:3
- d)None
Correct answer is option 'A'. Can you explain this answer?
A, B, and C are partners with capitals of Rs. 1,00,000, Rs. 75,000 and Rs. 50,000. On C’s retirement his share is acquired by A and B in the ration of 6:4. Gaining ratio will be:
a)
3:2
b)
2:2
c)
2:3
d)
None
|
Nandini Iyer answered |
As nothing has been mentioned regarding the profit sharing ratio and partnership deed is also silent, so the profit sharing ratio is 1:1:1.
A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life premium is fully charged to revenue as and when paid?- a)Rs. 50,000 credited to all the partners in old ratio.
- b)Rs. 2,50,000 credited to all the partners in old ratio
- c)Rs. 2,00,000 credited to all the partners in old ratio
- d)No treatment is required
Correct answer is option 'A'. Can you explain this answer?
A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life premium is fully charged to revenue as and when paid?
a)
Rs. 50,000 credited to all the partners in old ratio.
b)
Rs. 2,50,000 credited to all the partners in old ratio
c)
Rs. 2,00,000 credited to all the partners in old ratio
d)
No treatment is required
|
Sagarika Pillai answered |
's capital account for the surrender value of the policy?
The surrender value of the policy will be credited to the capital account of A, B and C in their profit sharing ratio of 2:2:1. After B's retirement, the new profit sharing ratio will be 3:2 (equal sharing between A and C), so the surrender value will be credited to their capital accounts in the ratio of 3:2.
The entry in the capital accounts will be:
A's capital account: Dr. Rs. 75,000 (3/5 of surrender value)
C's capital account: Dr. Rs. 50,000 (2/5 of surrender value)
To Joint Life Policy account: Cr. Rs. 1,25,000 (total surrender value)
The surrender value of the policy will be credited to the capital account of A, B and C in their profit sharing ratio of 2:2:1. After B's retirement, the new profit sharing ratio will be 3:2 (equal sharing between A and C), so the surrender value will be credited to their capital accounts in the ratio of 3:2.
The entry in the capital accounts will be:
A's capital account: Dr. Rs. 75,000 (3/5 of surrender value)
C's capital account: Dr. Rs. 50,000 (2/5 of surrender value)
To Joint Life Policy account: Cr. Rs. 1,25,000 (total surrender value)
Balances of M/s. Ram, Rahul and Rohit sharing profits and losses in proportion to their capitals, stood as Ram Rs. 3,00,000; Rahul Rs. 2,00,000 and Rohit Rs. 1,00,000. Ram desired to retire form the firm and the remaining partners decided to carry on, Joint life policy of the partners surrendered and cash obtained Rs. 60,000. What will be the treatment for JLP?- a)Rs. 60,000 credited to Revaluation Account
- b)Rs. 60,000 credited to Joint Life Policy Account
- c)Rs. 30,000 debited to Ram’s Capital Account
- d)Either ‘a’ or ‘b’
Correct answer is option 'B'. Can you explain this answer?
Balances of M/s. Ram, Rahul and Rohit sharing profits and losses in proportion to their capitals, stood as Ram Rs. 3,00,000; Rahul Rs. 2,00,000 and Rohit Rs. 1,00,000. Ram desired to retire form the firm and the remaining partners decided to carry on, Joint life policy of the partners surrendered and cash obtained Rs. 60,000. What will be the treatment for JLP?
a)
Rs. 60,000 credited to Revaluation Account
b)
Rs. 60,000 credited to Joint Life Policy Account
c)
Rs. 30,000 debited to Ram’s Capital Account
d)
Either ‘a’ or ‘b’
|
|
Aarya Sharma answered |
Answer: b) Rs. 60,000 credited to Joint Life Policy Account
Explanation:
When a partner retires or dies, the Joint Life Policy taken on the lives of the partners is surrendered and the cash received is credited to the Joint Life Policy Account. In this case, Ram is retiring and the remaining partners are continuing the business. Therefore, the Joint Life Policy will be surrendered and the cash received of Rs. 60,000 will be credited to the Joint Life Policy Account. This account will then be distributed among the remaining partners in their profit sharing ratio.
Explanation:
When a partner retires or dies, the Joint Life Policy taken on the lives of the partners is surrendered and the cash received is credited to the Joint Life Policy Account. In this case, Ram is retiring and the remaining partners are continuing the business. Therefore, the Joint Life Policy will be surrendered and the cash received of Rs. 60,000 will be credited to the Joint Life Policy Account. This account will then be distributed among the remaining partners in their profit sharing ratio.
X, Y, Z are partners sharing profits and losses equally. They took a joint life policy of Rs. 5,00,000 with a surrender value of Rs. 3,00,000. The firm treats the insurance premium as an expense. Y retired and X and Z decided to share profits and losses in 2:1. The amount of Joint life policy will be transferred as: - a)Credited to X, Y and Z’s Capital accounts with Rs. 1,00,000 each
- b)Credited to X, Y and Z’s capital accounts with Rs. 1,66,667 each
- c)Credited to X, and Z capital accounts with Rs. 2,50,000 each
- d)Credited to Y’s capital account with Rs. 3,00,000 each
Correct answer is option 'A'. Can you explain this answer?
X, Y, Z are partners sharing profits and losses equally. They took a joint life policy of Rs. 5,00,000 with a surrender value of Rs. 3,00,000. The firm treats the insurance premium as an expense. Y retired and X and Z decided to share profits and losses in 2:1. The amount of Joint life policy will be transferred as:
a)
Credited to X, Y and Z’s Capital accounts with Rs. 1,00,000 each
b)
Credited to X, Y and Z’s capital accounts with Rs. 1,66,667 each
c)
Credited to X, and Z capital accounts with Rs. 2,50,000 each
d)
Credited to Y’s capital account with Rs. 3,00,000 each
|
|
Ameya Menon answered |
's capital accounts in their profit sharing ratio
b)Credited to X and Z's capital accounts in their new profit sharing ratio
c)Credited to Y's capital account
d)Credited to the firm's current account
Answer: b) Credited to X and Z's capital accounts in their new profit sharing ratio
Explanation:
Since Y has retired, the partnership firm is now between X and Z only. They have also decided to share profits and losses in the ratio of 2:1. Therefore, the amount of joint life policy should be transferred to their capital accounts in the new profit sharing ratio. Hence, option b) is the correct answer. Option a) is incorrect because Y is no longer a partner in the firm. Option c) is also incorrect because Y has already received his share of the partnership assets upon retirement. Option d) is incorrect because the joint life policy is a partnership asset and not a current liability of the firm.
b)Credited to X and Z's capital accounts in their new profit sharing ratio
c)Credited to Y's capital account
d)Credited to the firm's current account
Answer: b) Credited to X and Z's capital accounts in their new profit sharing ratio
Explanation:
Since Y has retired, the partnership firm is now between X and Z only. They have also decided to share profits and losses in the ratio of 2:1. Therefore, the amount of joint life policy should be transferred to their capital accounts in the new profit sharing ratio. Hence, option b) is the correct answer. Option a) is incorrect because Y is no longer a partner in the firm. Option c) is also incorrect because Y has already received his share of the partnership assets upon retirement. Option d) is incorrect because the joint life policy is a partnership asset and not a current liability of the firm.
A, B and C are partners sharing profits in the ratio 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B. - a)Rs. 20,000 and Rs. 10,000
- b)Rs. 8,000 and Rs. 4,000
- c)They will not contribute any thing
- d)Information is insufficient for any comment
Correct answer is option 'B'. Can you explain this answer?
A, B and C are partners sharing profits in the ratio 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B.
a)
Rs. 20,000 and Rs. 10,000
b)
Rs. 8,000 and Rs. 4,000
c)
They will not contribute any thing
d)
Information is insufficient for any comment
|
Rajesh Jain answered |
Gaining partner compensate the retiring partner by paying goodwill in gaining ratio..
In this question gaining ratio is 4:6
and B's share of goodwill is 12000
so A will compensate 12000*4/6 I.e.8000
B will compensate 12000*2/6 I.e.4000
In this question gaining ratio is 4:6
and B's share of goodwill is 12000
so A will compensate 12000*4/6 I.e.8000
B will compensate 12000*2/6 I.e.4000
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 was shown in books of account. If A & C shares profits of B in 5:3, then find the value of goodwill shared between A and C.- a)Rs. 1,850 and Rs. 1,950.
- b) Rs. 1,650 and Rs. 1,750.
- c)Rs. 2,000 and Rs. 1,600.
- d) Rs. 1,950 and Rs. 1,650.
Correct answer is option 'A'. Can you explain this answer?
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 was shown in books of account. If A & C shares profits of B in 5:3, then find the value of goodwill shared between A and C.
a)
Rs. 1,850 and Rs. 1,950.
b)
Rs. 1,650 and Rs. 1,750.
c)
Rs. 2,000 and Rs. 1,600.
d)
Rs. 1,950 and Rs. 1,650.
|
|
Vaishnavi Joshi answered |
And C decide to share future profits in the ratio of 5:3, find the new profit sharing ratio of A and C.
Initially, the profit sharing ratio of A, B, and C was 4:3:2. When B retires, his share of the goodwill will be distributed between A and C. Let's calculate the amount of goodwill distributed to A and C.
B's share of goodwill = 3/(4+3+2) * 10,800 = Rs. 3,600
Since A and C will now share in the ratio of 5:3, the total profit sharing ratio will be 5+3=8.
Let X be the new profit sharing ratio of A in the new partnership.
Therefore, C's new profit sharing ratio will be (8 - X).
A's share of goodwill = Rs. 3,600 + X/(X+(8-X)) * 7,200
C's share of goodwill = Rs. 3,600 + (8-X)/(X+(8-X)) * 7,200
According to the question, A's share of goodwill is twice that of C's share of goodwill.
Therefore, we can write the equation as:
Rs. 3,600 + X/(X+8-X) * 7,200 = 2 * [Rs. 3,600 + (8-X)/(X+8-X) * 7,200]
Simplifying the above equation, we get:
X = 6
Therefore, the new profit sharing ratio of A and C will be 6:2 or 3:1.
Initially, the profit sharing ratio of A, B, and C was 4:3:2. When B retires, his share of the goodwill will be distributed between A and C. Let's calculate the amount of goodwill distributed to A and C.
B's share of goodwill = 3/(4+3+2) * 10,800 = Rs. 3,600
Since A and C will now share in the ratio of 5:3, the total profit sharing ratio will be 5+3=8.
Let X be the new profit sharing ratio of A in the new partnership.
Therefore, C's new profit sharing ratio will be (8 - X).
A's share of goodwill = Rs. 3,600 + X/(X+(8-X)) * 7,200
C's share of goodwill = Rs. 3,600 + (8-X)/(X+(8-X)) * 7,200
According to the question, A's share of goodwill is twice that of C's share of goodwill.
Therefore, we can write the equation as:
Rs. 3,600 + X/(X+8-X) * 7,200 = 2 * [Rs. 3,600 + (8-X)/(X+8-X) * 7,200]
Simplifying the above equation, we get:
X = 6
Therefore, the new profit sharing ratio of A and C will be 6:2 or 3:1.
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 was shown in books of account. If A & C shares profits of B in 5:3, then find the value of goodwill shared between A and C. - a)Rs. 1,850 and Rs. 1,950
- b)Rs. 1,650 and Rs. 1,750
- c)Rs. 2,000 and Rs. 1,600
- d)Rs. 1,950 and Rs.1,650
Correct answer is option 'D'. Can you explain this answer?
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 was shown in books of account. If A & C shares profits of B in 5:3, then find the value of goodwill shared between A and C.
a)
Rs. 1,850 and Rs. 1,950
b)
Rs. 1,650 and Rs. 1,750
c)
Rs. 2,000 and Rs. 1,600
d)
Rs. 1,950 and Rs.1,650
|
Janhavi Basu answered |
Calculation of gaining ratio
Old ratio (A, B and C) = 4 : 3 : 2
B retires from the firm
New artio (A and C ) = 5 : 3
Gaining ratio = New ratio - Old ratio
A's new share = (5/8) - (4/9) = (45 - 32) /72 = 13/72
C's new share = (3/8) - (2/9) = (27 - 16) / 36 = 11/72
gaining ratio = 13 : 11
2. Adjustment of goodwill
C's share of goodwill = (10800 * 3) / 9 = 3600
This share of goodwill is to be debited to remaining partners' capital account in their gaining ratio (i.e., 13 : 11 )
Journal entry for the above will be:
A's capital A/c Dr. 1950
C's capital A/c Dr. 1650
To B's capital A/c 3600
How unrecorded assets are treated at the time of retirement of a partner?- a)Credited to revaluation account
- b)Credited to capital account of retiring partner only
- c)Debited to revaluation account
- d)Credited to partner’s capital account
Correct answer is option 'A'. Can you explain this answer?
How unrecorded assets are treated at the time of retirement of a partner?
a)
Credited to revaluation account
b)
Credited to capital account of retiring partner only
c)
Debited to revaluation account
d)
Credited to partner’s capital account
|
Aditya Das answered |
Understanding Unrecorded Assets in Partner Retirement
When a partner retires from a partnership, the treatment of unrecorded assets is crucial. These assets have not been previously recognized in the partnership's books but hold value that needs to be addressed at the time of retirement.
Why Credit Unrecorded Assets to Partners' Capital Accounts?
- Recognition of Value: Unrecorded assets represent real value that the partnership possesses. When a partner retires, it is essential that this value is acknowledged and appropriately distributed among the remaining partners.
- Equitable Distribution: Crediting the unrecorded assets to the partners' capital accounts ensures that all partners, including the retiring one, receive their fair share of the partnership's total worth. This reflects the true financial position of the partnership.
- Final Settlement: By crediting these assets to the capital accounts, the retiring partner can receive their entitled portion during the settlement process. This also simplifies the accounting entries, as it consolidates the value into the capital accounts without the need for additional revaluation procedures.
Consequences of Other Options
- Option A (Revaluation Account): Crediting to the revaluation account would not directly benefit the retiring partner, as this account typically reflects changes in asset values rather than distribution.
- Option B (Retiring Partner Only): Credit to the retiring partner's capital account would not reflect the contributions of other partners, leading to unequal treatment.
- Option C (Debited to Revaluation Account): Debiting implies a reduction in value, which contradicts the purpose of recognizing unrecorded assets.
Conclusion
Thus, option D is the correct treatment for unrecorded assets at the time of a partner's retirement, ensuring fairness and accurate financial representation within the partnership.
When a partner retires from a partnership, the treatment of unrecorded assets is crucial. These assets have not been previously recognized in the partnership's books but hold value that needs to be addressed at the time of retirement.
Why Credit Unrecorded Assets to Partners' Capital Accounts?
- Recognition of Value: Unrecorded assets represent real value that the partnership possesses. When a partner retires, it is essential that this value is acknowledged and appropriately distributed among the remaining partners.
- Equitable Distribution: Crediting the unrecorded assets to the partners' capital accounts ensures that all partners, including the retiring one, receive their fair share of the partnership's total worth. This reflects the true financial position of the partnership.
- Final Settlement: By crediting these assets to the capital accounts, the retiring partner can receive their entitled portion during the settlement process. This also simplifies the accounting entries, as it consolidates the value into the capital accounts without the need for additional revaluation procedures.
Consequences of Other Options
- Option A (Revaluation Account): Crediting to the revaluation account would not directly benefit the retiring partner, as this account typically reflects changes in asset values rather than distribution.
- Option B (Retiring Partner Only): Credit to the retiring partner's capital account would not reflect the contributions of other partners, leading to unequal treatment.
- Option C (Debited to Revaluation Account): Debiting implies a reduction in value, which contradicts the purpose of recognizing unrecorded assets.
Conclusion
Thus, option D is the correct treatment for unrecorded assets at the time of a partner's retirement, ensuring fairness and accurate financial representation within the partnership.
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. A desired to retire form the firm, B and C share the future profits equally, Goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised.- a)Credit Partner’s Capital Account with old profit sharing ratio for Rs. 1,40,000.
- b)Credit Partner’s Capital Account with new profit sharing ratio for Rs. 1,40,000.
- c)Credit A’s Account with Rs. 40,000 and debit B’s Capital Account with Rs. 10,000 and C’s Capital Account with Rs. 30,000.
- d)Credit Partner’s Capital Account with gaining ratio for Rs. 1,40,000.
Correct answer is option 'C'. Can you explain this answer?
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. A desired to retire form the firm, B and C share the future profits equally, Goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised.
a)
Credit Partner’s Capital Account with old profit sharing ratio for Rs. 1,40,000.
b)
Credit Partner’s Capital Account with new profit sharing ratio for Rs. 1,40,000.
c)
Credit A’s Account with Rs. 40,000 and debit B’s Capital Account with Rs. 10,000 and C’s Capital Account with Rs. 30,000.
d)
Credit Partner’s Capital Account with gaining ratio for Rs. 1,40,000.
|
|
Pj Commerce Academy answered |
Calculation of A's share in goodwill:
- A's capital = Rs. 2,00,000
- Total capital = Rs. 2,00,000 + Rs. 3,00,000 + Rs. 2,00,000 = Rs. 7,00,000
- A's share in goodwill = (A's capital / Total capital) * Goodwill
= (2,00,000 / 7,00,000) * 1,40,000
= Rs. 40,000
Calculation of B and C's new profit sharing ratio:
- Total capital after A's retirement = Rs. 3,00,000 + Rs. 2,00,000 = Rs. 5,00,000
- B's new capital = Rs. 3,00,000 + Rs. 40,000 = Rs. 3,40,000
- C's new capital = Rs. 2,00,000 + Rs. 40,000 = Rs. 2,40,000
- B and C's new profit sharing ratio = B's new capital : C's new capital
= 3,40,000 : 2,40,000
= 17 : 12
Adjustment entries:
- Credit Partner's Capital Account with old profit sharing ratio for Rs. 1,40,000.
- Credit Partner's Capital Account with new profit sharing ratio for Rs. 1,40,000.
- Credit A's Account with Rs. 40,000.
- Debit B's Capital Account with Rs. 10,000.
- Debit C's Capital Account with Rs. 30,000.
Explanation of adjustment entries:
- The first entry credits Partner's Capital Account with old profit sharing ratio for Rs. 1,40,000. This is to transfer A's share in goodwill to the remaining partners, B and C, in their old profit sharing ratio.
- The second entry credits Partner's Capital Account with new profit sharing ratio for Rs. 1,40,000. This is to adjust the change in profit sharing ratio between B and C after A's retirement.
- The third entry credits A's Account with Rs. 40,000. This is to pay A his share in the goodwill.
- The fourth entry debits B's Capital Account with Rs. 10,000. This is to adjust B's capital as per the new profit sharing ratio.
- The fifth entry debits C's Capital Account with Rs. 30,000. This is to adjust C's capital as per the new profit sharing ratio.
Hence, option C is the correct answer.
- A's capital = Rs. 2,00,000
- Total capital = Rs. 2,00,000 + Rs. 3,00,000 + Rs. 2,00,000 = Rs. 7,00,000
- A's share in goodwill = (A's capital / Total capital) * Goodwill
= (2,00,000 / 7,00,000) * 1,40,000
= Rs. 40,000
Calculation of B and C's new profit sharing ratio:
- Total capital after A's retirement = Rs. 3,00,000 + Rs. 2,00,000 = Rs. 5,00,000
- B's new capital = Rs. 3,00,000 + Rs. 40,000 = Rs. 3,40,000
- C's new capital = Rs. 2,00,000 + Rs. 40,000 = Rs. 2,40,000
- B and C's new profit sharing ratio = B's new capital : C's new capital
= 3,40,000 : 2,40,000
= 17 : 12
Adjustment entries:
- Credit Partner's Capital Account with old profit sharing ratio for Rs. 1,40,000.
- Credit Partner's Capital Account with new profit sharing ratio for Rs. 1,40,000.
- Credit A's Account with Rs. 40,000.
- Debit B's Capital Account with Rs. 10,000.
- Debit C's Capital Account with Rs. 30,000.
Explanation of adjustment entries:
- The first entry credits Partner's Capital Account with old profit sharing ratio for Rs. 1,40,000. This is to transfer A's share in goodwill to the remaining partners, B and C, in their old profit sharing ratio.
- The second entry credits Partner's Capital Account with new profit sharing ratio for Rs. 1,40,000. This is to adjust the change in profit sharing ratio between B and C after A's retirement.
- The third entry credits A's Account with Rs. 40,000. This is to pay A his share in the goodwill.
- The fourth entry debits B's Capital Account with Rs. 10,000. This is to adjust B's capital as per the new profit sharing ratio.
- The fifth entry debits C's Capital Account with Rs. 30,000. This is to adjust C's capital as per the new profit sharing ratio.
Hence, option C is the correct answer.
Joint Life Policy is taken by the firm on the life(s) of ………- a)All the partners jointly.
- b)All the partners severely.
- c)On the life of all the partners and employees of the firm.
- d)‘a’ and ‘b’.
Correct answer is option 'D'. Can you explain this answer?
Joint Life Policy is taken by the firm on the life(s) of ………
a)
All the partners jointly.
b)
All the partners severely.
c)
On the life of all the partners and employees of the firm.
d)
‘a’ and ‘b’.
|
Srsps answered |
Joint Life Policy:
A joint life policy is a type of life insurance policy that covers the lives of multiple individuals under a single policy. In this case, the policy is taken by the firm on the life(s) of the partners and/or employees. Let's explore the options given:
A: All the partners jointly:
- This option suggests that the joint life policy covers all the partners of the firm.
- The policy would provide coverage for the lives of all the partners named in the policy document.
B: All the partners severely:
- It seems like there might be a typo in this option as "severely" doesn't make sense in the context of a joint life policy.
- It is more likely that the intended word is "severally," which means individually or separately.
- If this is the case, then the policy would cover each partner's life separately, rather than jointly.
C: On the life of all the partners and employees of the firm:
- This option suggests that the joint life policy covers both the partners and employees of the firm.
- The policy would provide coverage for the lives of all the named partners and employees.
D: 'a' and 'b':
- This option states that both option 'a' (all the partners jointly) and option 'b' (all the partners severely) are correct.
- However, since option 'b' seems to have a typo, it is unclear what it means exactly.
Conclusion:
Based on the given options, it can be concluded that the Joint Life Policy is taken by the firm on the life(s) of all the partners and possibly the employees of the firm.
A joint life policy is a type of life insurance policy that covers the lives of multiple individuals under a single policy. In this case, the policy is taken by the firm on the life(s) of the partners and/or employees. Let's explore the options given:
A: All the partners jointly:
- This option suggests that the joint life policy covers all the partners of the firm.
- The policy would provide coverage for the lives of all the partners named in the policy document.
B: All the partners severely:
- It seems like there might be a typo in this option as "severely" doesn't make sense in the context of a joint life policy.
- It is more likely that the intended word is "severally," which means individually or separately.
- If this is the case, then the policy would cover each partner's life separately, rather than jointly.
C: On the life of all the partners and employees of the firm:
- This option suggests that the joint life policy covers both the partners and employees of the firm.
- The policy would provide coverage for the lives of all the named partners and employees.
D: 'a' and 'b':
- This option states that both option 'a' (all the partners jointly) and option 'b' (all the partners severely) are correct.
- However, since option 'b' seems to have a typo, it is unclear what it means exactly.
Conclusion:
Based on the given options, it can be concluded that the Joint Life Policy is taken by the firm on the life(s) of all the partners and possibly the employees of the firm.
A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B: - a)Rs. 20,000 and Rs. 10,000
- b)Rs. 8,000 and Rs. 4,000
- c)No contribution
- d)Rs. 15,000 and Rs. 15,000
Correct answer is option 'B'. Can you explain this answer?
A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B:
a)
Rs. 20,000 and Rs. 10,000
b)
Rs. 8,000 and Rs. 4,000
c)
No contribution
d)
Rs. 15,000 and Rs. 15,000
|
Muskan Singh answered |
Correct option is B Rs.8,000 and Rs.4,000.
On retirement of B, total goodwill of the firm is Rs. 30000
B's share of goodwill = Rs. 30000 * (2/5) = Rs. 12000
Contributions by A and C to compensate B will be in their gaining ratio i.e.,2 : 1
A's contribution = Rs. 12000 * (2/3) = Rs. 8000
B's contribution = Rs. 12000 * (1/3) = Rs. 4000
On retirement of B, total goodwill of the firm is Rs. 30000
B's share of goodwill = Rs. 30000 * (2/5) = Rs. 12000
Contributions by A and C to compensate B will be in their gaining ratio i.e.,2 : 1
A's contribution = Rs. 12000 * (2/3) = Rs. 8000
B's contribution = Rs. 12000 * (1/3) = Rs. 4000
When the goodwill is raised at its full value and written off at retirement of a partner, the remaining partners share goodwill in ______.- a)Old profit sharing Ratio
- b)New profit sharing Ratio
- c)Gaining Ratio
- d)Equally.
Correct answer is option 'C'. Can you explain this answer?
When the goodwill is raised at its full value and written off at retirement of a partner, the remaining partners share goodwill in ______.
a)
Old profit sharing Ratio
b)
New profit sharing Ratio
c)
Gaining Ratio
d)
Equally.
|
|
Ankita answered |
Gaining Ratio, Option C
A, B and C were partners sharing profits and losses in the ratio of 3:2:1. A retired and Goodwill of the firm is to be valued at Rs. 24,000 and Goodwill Account is to be raise which is not appearing in the balance sheet. What will be the treatment for goodwill?- a)Credited to Revaluation Account at Rs. 24,000.
- b)Credited to partners capital account Rs. 24,000 in profits sharing ratio.
- c)Only A’s capital account credited with Rs. 12,000.
- d)Only A’s capital account credited with Rs. 24,000.
Correct answer is option 'B'. Can you explain this answer?
A, B and C were partners sharing profits and losses in the ratio of 3:2:1. A retired and Goodwill of the firm is to be valued at Rs. 24,000 and Goodwill Account is to be raise which is not appearing in the balance sheet. What will be the treatment for goodwill?
a)
Credited to Revaluation Account at Rs. 24,000.
b)
Credited to partners capital account Rs. 24,000 in profits sharing ratio.
c)
Only A’s capital account credited with Rs. 12,000.
d)
Only A’s capital account credited with Rs. 24,000.
|
|
Sameer Basu answered |
Treatment for Goodwill
The treatment for goodwill in this scenario would be to credit it to the partners' capital accounts in the profits sharing ratio. Option B is the correct answer.
Explanation:
Under the given scenario, A, B, and C are partners sharing profits and losses in the ratio of 3:2:1. Goodwill of the firm is valued at Rs. 24,000, and it is not appearing in the balance sheet. In such cases, the treatment for goodwill is as follows:
1. Goodwill Account: Goodwill is an intangible asset that represents the reputation, customer base, and other non-physical attributes of a business. It is valued in monetary terms and should be recorded in the books of accounts. However, since it is not appearing in the balance sheet, the first step is to raise a Goodwill Account by crediting it with the value of goodwill, i.e., Rs. 24,000.
2. Revaluation Account: Revaluation Account is used to record the adjustments made to the assets and liabilities of the firm when there is a change in the partnership. However, in this scenario, there is no mention of any revaluation of assets or liabilities. Hence, the option of crediting Goodwill to the Revaluation Account at Rs. 24,000 (Option A) is not applicable.
3. Partners' Capital Accounts: The final step in the treatment of goodwill is to distribute it among the partners' capital accounts. As per the profits sharing ratio of 3:2:1, the amount of Rs. 24,000 should be divided in the same ratio.
- A's capital account will be credited with Rs. (24,000 * 3/6) = Rs. 12,000
- B's capital account will be credited with Rs. (24,000 * 2/6) = Rs. 8,000
- C's capital account will be credited with Rs. (24,000 * 1/6) = Rs. 4,000
Hence, the correct treatment for goodwill in this scenario would be to credit it to the partners' capital accounts in the profits sharing ratio, as mentioned in option B.
The treatment for goodwill in this scenario would be to credit it to the partners' capital accounts in the profits sharing ratio. Option B is the correct answer.
Explanation:
Under the given scenario, A, B, and C are partners sharing profits and losses in the ratio of 3:2:1. Goodwill of the firm is valued at Rs. 24,000, and it is not appearing in the balance sheet. In such cases, the treatment for goodwill is as follows:
1. Goodwill Account: Goodwill is an intangible asset that represents the reputation, customer base, and other non-physical attributes of a business. It is valued in monetary terms and should be recorded in the books of accounts. However, since it is not appearing in the balance sheet, the first step is to raise a Goodwill Account by crediting it with the value of goodwill, i.e., Rs. 24,000.
2. Revaluation Account: Revaluation Account is used to record the adjustments made to the assets and liabilities of the firm when there is a change in the partnership. However, in this scenario, there is no mention of any revaluation of assets or liabilities. Hence, the option of crediting Goodwill to the Revaluation Account at Rs. 24,000 (Option A) is not applicable.
3. Partners' Capital Accounts: The final step in the treatment of goodwill is to distribute it among the partners' capital accounts. As per the profits sharing ratio of 3:2:1, the amount of Rs. 24,000 should be divided in the same ratio.
- A's capital account will be credited with Rs. (24,000 * 3/6) = Rs. 12,000
- B's capital account will be credited with Rs. (24,000 * 2/6) = Rs. 8,000
- C's capital account will be credited with Rs. (24,000 * 1/6) = Rs. 4,000
Hence, the correct treatment for goodwill in this scenario would be to credit it to the partners' capital accounts in the profits sharing ratio, as mentioned in option B.
A, B and C are partners sharing profits equally. A retires and goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. A will get credit of :- a)Rs. 2,000
- b)Rs. 3,000
- c)Rs. 500
- d)Rs. 1,000
Correct answer is option 'D'. Can you explain this answer?
A, B and C are partners sharing profits equally. A retires and goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. A will get credit of :
a)
Rs. 2,000
b)
Rs. 3,000
c)
Rs. 500
d)
Rs. 1,000
|
|
Divya Dasgupta answered |
Valuation of Goodwill on Retirement of a Partner
- Goodwill is an intangible asset that represents the value of a firm's brand name, reputation, customer base, and other such factors that contribute to its earning capacity.
- When a partner retires from a partnership firm, the goodwill of the firm needs to be revalued to account for the change in the partnership.
- The amount by which the revalued goodwill exceeds its book value is known as the 'Gaining Ratio'.
- The gaining ratio represents the new profit sharing ratio among the remaining partners.
- The retiring partner is entitled to a share of the excess goodwill in proportion to their profit-sharing ratio in the old firm.
Calculation of Credit to Retiring Partner
- In this case, the partners A, B, and C share profits equally, i.e. in the ratio of 1:1:1.
- A retires, and the goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000.
- The gaining ratio is calculated as follows:
Gaining Ratio = New Profit Sharing Ratio - Old Profit Sharing Ratio
= (B:C) - (A:B:C)
= (1:1)/(1:1:1)
= 1:1 - 1:1:1
= 0:1:1
- The retiring partner A is entitled to a share of the excess goodwill in proportion to their profit-sharing ratio in the old firm, i.e. 1/3.
- Therefore, A's credit will be calculated as follows:
Credit to Retiring Partner = Gaining Ratio x Excess Goodwill x Retiring Partner's Profit-Sharing Ratio
= 0:1:1 x (6,000 - 3,000) x 1/3
= 0 x 3,000 x 1/3
= 0
- Hence, the credit to retiring partner A is Rs. 0, which means that they are not entitled to any share of the excess goodwill.
- Goodwill is an intangible asset that represents the value of a firm's brand name, reputation, customer base, and other such factors that contribute to its earning capacity.
- When a partner retires from a partnership firm, the goodwill of the firm needs to be revalued to account for the change in the partnership.
- The amount by which the revalued goodwill exceeds its book value is known as the 'Gaining Ratio'.
- The gaining ratio represents the new profit sharing ratio among the remaining partners.
- The retiring partner is entitled to a share of the excess goodwill in proportion to their profit-sharing ratio in the old firm.
Calculation of Credit to Retiring Partner
- In this case, the partners A, B, and C share profits equally, i.e. in the ratio of 1:1:1.
- A retires, and the goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000.
- The gaining ratio is calculated as follows:
Gaining Ratio = New Profit Sharing Ratio - Old Profit Sharing Ratio
= (B:C) - (A:B:C)
= (1:1)/(1:1:1)
= 1:1 - 1:1:1
= 0:1:1
- The retiring partner A is entitled to a share of the excess goodwill in proportion to their profit-sharing ratio in the old firm, i.e. 1/3.
- Therefore, A's credit will be calculated as follows:
Credit to Retiring Partner = Gaining Ratio x Excess Goodwill x Retiring Partner's Profit-Sharing Ratio
= 0:1:1 x (6,000 - 3,000) x 1/3
= 0 x 3,000 x 1/3
= 0
- Hence, the credit to retiring partner A is Rs. 0, which means that they are not entitled to any share of the excess goodwill.
Claim of the retiring partner is payable in the following form.- a)Fully in cash.
- b)Fully transferred to loan account to be paid later with some interest on it.
- c)Partly in cash and partly as loan repayable later with agreed interest.
- d)Any of the above method
Correct answer is option 'D'. Can you explain this answer?
Claim of the retiring partner is payable in the following form.
a)
Fully in cash.
b)
Fully transferred to loan account to be paid later with some interest on it.
c)
Partly in cash and partly as loan repayable later with agreed interest.
d)
Any of the above method
|
Divey Sethi answered |
Claim of the retiring partner is payable in the following form:
There are several options for the payment of the retiring partner's claim:
A: Fully in cash
- The retiring partner's claim is paid in full with cash.
- This option provides immediate liquidity to the retiring partner.
B: Fully transferred to loan account to be paid later with some interest on it
- The retiring partner's claim is transferred to a loan account.
- The payment is deferred and the retiring partner will receive the amount with interest at a later date.
- This option allows for flexibility in managing the cash flow of the partnership.
C: Partly in cash and partly as loan repayable later with agreed interest
- The retiring partner's claim is divided into two parts.
- A portion is paid in cash immediately, while the remaining amount is transferred to a loan account to be repaid later with interest.
- This option provides both immediate liquidity and the opportunity to earn interest on the remaining amount.
D: Any of the above methods
- The retiring partner's claim can be paid using any combination of the above methods.
- The specific payment method can be determined through negotiation and agreement between the retiring partner and the remaining partners.
In conclusion, the retiring partner's claim can be paid in various forms, including full cash payment, transfer to a loan account, or a combination of cash and loan repayment. The choice of payment method depends on factors such as liquidity needs, cash flow management, and agreement between the partners.
There are several options for the payment of the retiring partner's claim:
A: Fully in cash
- The retiring partner's claim is paid in full with cash.
- This option provides immediate liquidity to the retiring partner.
B: Fully transferred to loan account to be paid later with some interest on it
- The retiring partner's claim is transferred to a loan account.
- The payment is deferred and the retiring partner will receive the amount with interest at a later date.
- This option allows for flexibility in managing the cash flow of the partnership.
C: Partly in cash and partly as loan repayable later with agreed interest
- The retiring partner's claim is divided into two parts.
- A portion is paid in cash immediately, while the remaining amount is transferred to a loan account to be repaid later with interest.
- This option provides both immediate liquidity and the opportunity to earn interest on the remaining amount.
D: Any of the above methods
- The retiring partner's claim can be paid using any combination of the above methods.
- The specific payment method can be determined through negotiation and agreement between the retiring partner and the remaining partners.
In conclusion, the retiring partner's claim can be paid in various forms, including full cash payment, transfer to a loan account, or a combination of cash and loan repayment. The choice of payment method depends on factors such as liquidity needs, cash flow management, and agreement between the partners.
A, B, and C were partners in a firm sharing profits and losses in the ratio of 2:2:1, respectively, with capital balances of Rs. 50,000 for A and B, and Rs. 25,000 for C. B declared to retire from the firm, and the balance in reserve on that date was Rs. 15,000. If the goodwill of the firm was valued at Rs. 30,000 and the profit on revaluation was Rs. 7,050, what amount will be transferred to the loan account of B?- a)Rs. 50,820
- b)Rs. 70,820
- c)Rs. 25,820
- d)Rs. 58,820
Correct answer is option 'B'. Can you explain this answer?
A, B, and C were partners in a firm sharing profits and losses in the ratio of 2:2:1, respectively, with capital balances of Rs. 50,000 for A and B, and Rs. 25,000 for C. B declared to retire from the firm, and the balance in reserve on that date was Rs. 15,000. If the goodwill of the firm was valued at Rs. 30,000 and the profit on revaluation was Rs. 7,050, what amount will be transferred to the loan account of B?
a)
Rs. 50,820
b)
Rs. 70,820
c)
Rs. 25,820
d)
Rs. 58,820
|
Nipuns Institute answered |
To determine the amount transferred to B's loan account upon retirement, follow these steps:
- Calculate B's share of goodwill: Goodwill is valued at Rs. 30,000. B's share (2/5) is:Rs. 30,000 × (2/5) = Rs. 12,000.
- Determine profit on revaluation: The profit on revaluation is Rs. 7,050. B's share (2/5) is:Rs. 7,050 × (2/5) = Rs. 2,820.
- Calculate total amount due to B: Combine B's share of goodwill and profit on revaluation:Rs. 12,000 + Rs. 2,820 = Rs. 14,820.
- Include B's capital balance: B's capital balance is Rs. 50,000.
- Account for reserves: Balance in reserve is Rs. 15,000. B's share (2/5) is:Rs. 15,000 × (2/5) = Rs. 6,000.
- Calculate total amount transferred to B's loan account: Add B's capital balance, share of goodwill, profit on revaluation, and share of reserves:Rs. 50,000 + Rs. 12,000 + Rs. 2,820 + Rs. 6,000 = Rs. 70,820.
Final Amount: Rs. 70,820 will be transferred to B's loan account.
At the time of retirement of a partner, firm gets____________from the insurance company against the Joint Life Policy taken jointly for all the partners.- a)Policy Amount
- b)Surrender Value
- c)Policy Value for the retiring partner and Surrender Value for the rest.
- d)Surrender Value for all the partners
Correct answer is option 'B'. Can you explain this answer?
At the time of retirement of a partner, firm gets____________from the insurance company against the Joint Life Policy taken jointly for all the partners.
a)
Policy Amount
b)
Surrender Value
c)
Policy Value for the retiring partner and Surrender Value for the rest.
d)
Surrender Value for all the partners
|
|
Nandini Iyer answered |
Reason Behind This : When a partner will die, insurance policy will discontinue. So, firm only gets surrender value as per the rules and regulations of insurance companies in India.
A, B, and C are partners with capitals of Rs. 1,00,000, Rs. 75,000 and Rs. 50,000. On C’s retirement his share is acquired by A and B in the ration of 6:4. Gaining ratio will be:- a)3:2
- b)2:2
- c)2:3
- d)None
Correct answer is option 'A'. Can you explain this answer?
A, B, and C are partners with capitals of Rs. 1,00,000, Rs. 75,000 and Rs. 50,000. On C’s retirement his share is acquired by A and B in the ration of 6:4. Gaining ratio will be:
a)
3:2
b)
2:2
c)
2:3
d)
None
|
|
Aditya Das answered |
On C's investment of Rs. 50,000, A and B invest Rs. 1,00,000 and Rs. 75,000 respectively.
Let's calculate the ratio of their investments:
A's investment = Rs. 1,00,000
B's investment = Rs. 75,000
C's investment = Rs. 50,000
To find the ratio, we divide each investment by the smallest investment:
A's ratio = A's investment / C's investment = Rs. 1,00,000 / Rs. 50,000 = 2
B's ratio = B's investment / C's investment = Rs. 75,000 / Rs. 50,000 = 1.5
C's ratio = C's investment / C's investment = Rs. 50,000 / Rs. 50,000 = 1
So, the ratio of their investments is 2:1.5:1.
Now, let's calculate the ratio of their profits:
Let the total profit be X.
A's share of profit = (A's ratio / Total ratio) * X
= (2 / (2 + 1.5 + 1)) * X
= (2 / 4.5) * X
= 4X / 9
B's share of profit = (B's ratio / Total ratio) * X
= (1.5 / (2 + 1.5 + 1)) * X
= (1.5 / 4.5) * X
= 3X / 9
C's share of profit = (C's ratio / Total ratio) * X
= (1 / (2 + 1.5 + 1)) * X
= (1 / 4.5) * X
= 2X / 9
So, the ratio of their profits is 4X/9 : 3X/9 : 2X/9, which simplifies to 4:3:2.
Let's calculate the ratio of their investments:
A's investment = Rs. 1,00,000
B's investment = Rs. 75,000
C's investment = Rs. 50,000
To find the ratio, we divide each investment by the smallest investment:
A's ratio = A's investment / C's investment = Rs. 1,00,000 / Rs. 50,000 = 2
B's ratio = B's investment / C's investment = Rs. 75,000 / Rs. 50,000 = 1.5
C's ratio = C's investment / C's investment = Rs. 50,000 / Rs. 50,000 = 1
So, the ratio of their investments is 2:1.5:1.
Now, let's calculate the ratio of their profits:
Let the total profit be X.
A's share of profit = (A's ratio / Total ratio) * X
= (2 / (2 + 1.5 + 1)) * X
= (2 / 4.5) * X
= 4X / 9
B's share of profit = (B's ratio / Total ratio) * X
= (1.5 / (2 + 1.5 + 1)) * X
= (1.5 / 4.5) * X
= 3X / 9
C's share of profit = (C's ratio / Total ratio) * X
= (1 / (2 + 1.5 + 1)) * X
= (1 / 4.5) * X
= 2X / 9
So, the ratio of their profits is 4X/9 : 3X/9 : 2X/9, which simplifies to 4:3:2.
At the time of retirement of a partner, firm gets ……… from the insurance company against the Joint Life Policy taken severely for each partner.- a)Policy Amount.
- b)Surrender Value.
- c)Policy Value for the retiring partner and Surrender Value for the rest.
- d)Surrender Value for all the partners.
Correct answer is option 'D'. Can you explain this answer?
At the time of retirement of a partner, firm gets ……… from the insurance company against the Joint Life Policy taken severely for each partner.
a)
Policy Amount.
b)
Surrender Value.
c)
Policy Value for the retiring partner and Surrender Value for the rest.
d)
Surrender Value for all the partners.
|
Kalyan Ghoshal answered |
Understanding Retirement of a Partner and Joint Life Policy
When a partner retires from a firm, the financial implications of a Joint Life Policy taken for the partners are important to consider. Here’s a detailed explanation of why the correct answer is option 'D'.
What is a Joint Life Policy?
- A Joint Life Policy is an insurance coverage that insures the lives of multiple partners in a firm.
- In the event of death or retirement, the policy provides a payout to the firm.
What Happens Upon Retirement?
- Upon a partner's retirement, the insurance company pays out a sum based on the policy.
- This payout is not just for the retiring partner but also considers the remaining partners.
Why is Option 'D' Correct?
- Surrender Value for All Partners: When a partner retires, the firm receives the surrender value of the Joint Life Policy that was taken for all partners.
- Understanding Surrender Value: The surrender value is the amount the insurance company pays back to the policyholders if they decide to terminate the policy before the maturity date.
- Equitable Distribution: The surrender value reflects the accumulated value of the policy based on all partners, ensuring fair treatment for the remaining partners post-retirement.
Conclusion
In summary, upon the retirement of a partner, the firm receives the surrender value for all partners, making option 'D' correct. This process ensures that the firm's financial responsibility is managed effectively, maintaining equity among partners in the joint policy.
When a partner retires from a firm, the financial implications of a Joint Life Policy taken for the partners are important to consider. Here’s a detailed explanation of why the correct answer is option 'D'.
What is a Joint Life Policy?
- A Joint Life Policy is an insurance coverage that insures the lives of multiple partners in a firm.
- In the event of death or retirement, the policy provides a payout to the firm.
What Happens Upon Retirement?
- Upon a partner's retirement, the insurance company pays out a sum based on the policy.
- This payout is not just for the retiring partner but also considers the remaining partners.
Why is Option 'D' Correct?
- Surrender Value for All Partners: When a partner retires, the firm receives the surrender value of the Joint Life Policy that was taken for all partners.
- Understanding Surrender Value: The surrender value is the amount the insurance company pays back to the policyholders if they decide to terminate the policy before the maturity date.
- Equitable Distribution: The surrender value reflects the accumulated value of the policy based on all partners, ensuring fair treatment for the remaining partners post-retirement.
Conclusion
In summary, upon the retirement of a partner, the firm receives the surrender value for all partners, making option 'D' correct. This process ensures that the firm's financial responsibility is managed effectively, maintaining equity among partners in the joint policy.
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 shown in books of account. If A & C shares profits of B in 5:3, then find the new profit sharing ratio.- a)13:11.
- b)17:11.
- c)31:11.
- d)14:21.
Correct answer is option 'A'. Can you explain this answer?
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 shown in books of account. If A & C shares profits of B in 5:3, then find the new profit sharing ratio.
a)
13:11.
b)
17:11.
c)
31:11.
d)
14:21.
|
Aman Chaudhary answered |
Given, A:B:C = 4:3:2 and B retires.
Step 1: Calculating B's share in the profits
Let the total profits be x.
B's share = 3/(4+3+2) * x = 3/9 * x = x/3
Step 2: Calculating the value of Goodwill
Goodwill = Rs. 10,800
Step 3: Calculating the amount to be paid to B
As per the question, A and C will share B's profits in the ratio of 5:3.
Total share of A and C = 5+3 = 8
B's share = x/3
Therefore, A's share = (5/8) * (x/3) = 5x/24
C's share = (3/8) * (x/3) = 3x/24 = x/8
Total amount to be paid to B = Goodwill + B's share in profits - A's share - C's share
= 10,800 + (x/3) - (5x/24) - (x/8)
= 10,800 + x/24
Step 4: Calculating the new profit sharing ratio
Let the new profit sharing ratio be P:Q:R.
P = A's new share in profits
Q = B's new share in profits (which is 0 as B has retired)
R = C's new share in profits
Total profit = x + 10,800 (Goodwill)
Total share of A, B and C = P + Q + R = P + R (as Q = 0)
As per the question, A:C share B's profits in the ratio of 5:3.
Therefore, A's new share = 4/9 * (x + 10,800) + 5/8 * (x/3)
C's new share = 2/9 * (x + 10,800) + 3/8 * (x/3)
Total share of A and C = P + R = A's new share + C's new share
= (4/9 * (x + 10,800) + 5/8 * (x/3)) + (2/9 * (x + 10,800) + 3/8 * (x/3))
= (8x + 77,760)/216
Therefore, the new profit sharing ratio P:Q:R = (4/9 * (x + 10,800) + 5/8 * (x/3)):(0):(2/9 * (x + 10,800) + 3/8 * (x/3))
Simplifying this, we get P:Q:R = 13:0:11
Hence, the correct answer is option A.
Step 1: Calculating B's share in the profits
Let the total profits be x.
B's share = 3/(4+3+2) * x = 3/9 * x = x/3
Step 2: Calculating the value of Goodwill
Goodwill = Rs. 10,800
Step 3: Calculating the amount to be paid to B
As per the question, A and C will share B's profits in the ratio of 5:3.
Total share of A and C = 5+3 = 8
B's share = x/3
Therefore, A's share = (5/8) * (x/3) = 5x/24
C's share = (3/8) * (x/3) = 3x/24 = x/8
Total amount to be paid to B = Goodwill + B's share in profits - A's share - C's share
= 10,800 + (x/3) - (5x/24) - (x/8)
= 10,800 + x/24
Step 4: Calculating the new profit sharing ratio
Let the new profit sharing ratio be P:Q:R.
P = A's new share in profits
Q = B's new share in profits (which is 0 as B has retired)
R = C's new share in profits
Total profit = x + 10,800 (Goodwill)
Total share of A, B and C = P + Q + R = P + R (as Q = 0)
As per the question, A:C share B's profits in the ratio of 5:3.
Therefore, A's new share = 4/9 * (x + 10,800) + 5/8 * (x/3)
C's new share = 2/9 * (x + 10,800) + 3/8 * (x/3)
Total share of A and C = P + R = A's new share + C's new share
= (4/9 * (x + 10,800) + 5/8 * (x/3)) + (2/9 * (x + 10,800) + 3/8 * (x/3))
= (8x + 77,760)/216
Therefore, the new profit sharing ratio P:Q:R = (4/9 * (x + 10,800) + 5/8 * (x/3)):(0):(2/9 * (x + 10,800) + 3/8 * (x/3))
Simplifying this, we get P:Q:R = 13:0:11
Hence, the correct answer is option A.
A, B and C are partners sharing profits and losses in the ratio of 3:2:1. C retires on a decided date and Goodwill of the firm is to be valued at Rs. 60,000. Find the amount payable to retiring partner on account of goodwill.- a)Rs. 30,000.
- b)Rs. 20,000.
- c)Rs. 10,000.
- d)Rs. 60,000.
Correct answer is option 'C'. Can you explain this answer?
A, B and C are partners sharing profits and losses in the ratio of 3:2:1. C retires on a decided date and Goodwill of the firm is to be valued at Rs. 60,000. Find the amount payable to retiring partner on account of goodwill.
a)
Rs. 30,000.
b)
Rs. 20,000.
c)
Rs. 10,000.
d)
Rs. 60,000.
|
Harshad Nair answered |
Understanding Goodwill in Partnerships
In a partnership, goodwill represents the intangible value of the business, often calculated during the retirement of a partner. In this case, C is retiring, and the firm's goodwill is valued at Rs. 60,000.
Profit Sharing Ratio
The partners share profits and losses in the ratio of 3:2:1, which corresponds to:
- A = 3 parts
- B = 2 parts
- C = 1 part
Calculating C's Share of Goodwill
To determine how much C should receive from the goodwill, we need to calculate C's share based on the total goodwill value:
- Total parts in the ratio = 3 + 2 + 1 = 6 parts
- C's share of the goodwill = (C's share in the ratio / Total parts) × Total Goodwill
This can be calculated as follows:
- C's share = (1/6) × Rs. 60,000
Calculation
- C's share = Rs. 10,000
Conclusion
Thus, the amount payable to the retiring partner C on account of goodwill is:
- **Rs. 10,000**
This aligns with option 'C'.
By understanding the distribution of goodwill in partnerships, it becomes clear how retiring partners receive their financial entitlements, ensuring a fair settlement based on their share in the partnership.
In a partnership, goodwill represents the intangible value of the business, often calculated during the retirement of a partner. In this case, C is retiring, and the firm's goodwill is valued at Rs. 60,000.
Profit Sharing Ratio
The partners share profits and losses in the ratio of 3:2:1, which corresponds to:
- A = 3 parts
- B = 2 parts
- C = 1 part
Calculating C's Share of Goodwill
To determine how much C should receive from the goodwill, we need to calculate C's share based on the total goodwill value:
- Total parts in the ratio = 3 + 2 + 1 = 6 parts
- C's share of the goodwill = (C's share in the ratio / Total parts) × Total Goodwill
This can be calculated as follows:
- C's share = (1/6) × Rs. 60,000
Calculation
- C's share = Rs. 10,000
Conclusion
Thus, the amount payable to the retiring partner C on account of goodwill is:
- **Rs. 10,000**
This aligns with option 'C'.
By understanding the distribution of goodwill in partnerships, it becomes clear how retiring partners receive their financial entitlements, ensuring a fair settlement based on their share in the partnership.
A, B and C takes a Joint Life Policy, after five years, B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life policy is maintained at the surrender value?- a)Rs. 50,000 credited to all the partners in old ratio.
- b)Rs. 2,50,000 credited to all the partners in old ratio.
- c)Rs. 2,00,000 credited to all the partners in old ratio.
- d)No treatment is required.
Correct answer is option 'D'. Can you explain this answer?
A, B and C takes a Joint Life Policy, after five years, B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life policy is maintained at the surrender value?
a)
Rs. 50,000 credited to all the partners in old ratio.
b)
Rs. 2,50,000 credited to all the partners in old ratio.
c)
Rs. 2,00,000 credited to all the partners in old ratio.
d)
No treatment is required.
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|
Mehul Ghoshal answered |
Understanding Joint Life Policy Treatment
In this scenario, the treatment of the Joint Life Policy (JLP) in the partners' capital accounts after B's retirement is crucial to understand.
Key Facts:
- Joint Life Policy amount: Rs. 2,50,000
- Surrender value after five years: Rs. 50,000
- Old profit-sharing ratio: 2:2:1 (A:B:C)
- New profit-sharing ratio after B's retirement: A and C share profits equally (1:1)
Why Option D is Correct:
- Nature of the JLP: The JLP is maintained at its surrender value of Rs. 50,000. This means that the policy is not encashed in full but only at its current surrender value.
- Distribution of Surrender Value: Since the policy is maintained at the surrender value, and given that it is not being realized for its full amount (Rs. 2,50,000), the partners do not receive the full benefit of the policy.
- No Immediate Treatment Required: With the JLP being kept at its surrender value, there is no need for any immediate treatment in the capital accounts of the partners. The surrender value reflects the amount that would be available, but it does not warrant actual distribution since the policy remains active.
- Future Considerations: The potential amounts related to the policy can be considered in future profit-sharing agreements or if the policy is eventually surrendered or matured.
In conclusion, since the Joint Life Policy is retained at its surrender value, there is no immediate adjustment or treatment required in the partners' capital accounts. Thus, the correct answer is option 'D': No treatment is required.
In this scenario, the treatment of the Joint Life Policy (JLP) in the partners' capital accounts after B's retirement is crucial to understand.
Key Facts:
- Joint Life Policy amount: Rs. 2,50,000
- Surrender value after five years: Rs. 50,000
- Old profit-sharing ratio: 2:2:1 (A:B:C)
- New profit-sharing ratio after B's retirement: A and C share profits equally (1:1)
Why Option D is Correct:
- Nature of the JLP: The JLP is maintained at its surrender value of Rs. 50,000. This means that the policy is not encashed in full but only at its current surrender value.
- Distribution of Surrender Value: Since the policy is maintained at the surrender value, and given that it is not being realized for its full amount (Rs. 2,50,000), the partners do not receive the full benefit of the policy.
- No Immediate Treatment Required: With the JLP being kept at its surrender value, there is no need for any immediate treatment in the capital accounts of the partners. The surrender value reflects the amount that would be available, but it does not warrant actual distribution since the policy remains active.
- Future Considerations: The potential amounts related to the policy can be considered in future profit-sharing agreements or if the policy is eventually surrendered or matured.
In conclusion, since the Joint Life Policy is retained at its surrender value, there is no immediate adjustment or treatment required in the partners' capital accounts. Thus, the correct answer is option 'D': No treatment is required.
A, B, and C are partners sharing profits in the ratio of 2:2:1. A's capital is Rs. 50,000, B's capital is Rs. 70,000, and C's capital is Rs. 35,000. B retires from the firm, and the balance in reserve on the date was Rs. 25,000. If the goodwill of the firm was valued at Rs. 30,000 and the profit on revaluation was Rs. 7,500, what is the total amount payable to B upon retirement?- a)Rs. 70,820
- b)Rs. 95,000
- c)Rs. 75,000
- d)Rs. 76,000
Correct answer is option 'B'. Can you explain this answer?
A, B, and C are partners sharing profits in the ratio of 2:2:1. A's capital is Rs. 50,000, B's capital is Rs. 70,000, and C's capital is Rs. 35,000. B retires from the firm, and the balance in reserve on the date was Rs. 25,000. If the goodwill of the firm was valued at Rs. 30,000 and the profit on revaluation was Rs. 7,500, what is the total amount payable to B upon retirement?
a)
Rs. 70,820
b)
Rs. 95,000
c)
Rs. 75,000
d)
Rs. 76,000
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Nipun Tuteja answered |
To calculate the amount payable to B upon retirement, follow these steps:
- Initial Capital Contributions:
- A: Rs. 50,000
- B: Rs. 70,000
- C: Rs. 35,000
- Goodwill of the Firm: Rs. 30,000
- Profit on Revaluation: Rs. 7,500
- Balance in Reserve: Rs. 25,000
Calculation of B's Share:
- Total Capital: Rs. 50,000 + Rs. 70,000 + Rs. 35,000 = Rs. 1,55,000
- Share of Goodwill: B's share = (B's Capital / Total Capital) × Goodwill = (70,000 / 1,55,000) × 30,000 = Rs. 13,548
- Share of Profit on Revaluation: B's share = (B's Capital / Total Capital) × Profit on Revaluation = (70,000 / 1,55,000) × 7,500 = Rs. 3,225
- Total Amount Payable to B:
- Capital: Rs. 70,000
- Goodwill Share: Rs. 13,548
- Profit on Revaluation: Rs. 3,225
- Reserve Share: Rs. 25,000 (B's share of reserve)
Final Amount Payable to B: Rs. 95,000
A, B, and C are partners sharing profits equally. A retires, and goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. How much will A get credited for goodwill?- a)Rs. 2,000
- b)Rs. 1,000
- c)Rs. 500
- d)Rs. 3,000
Correct answer is option 'B'. Can you explain this answer?
A, B, and C are partners sharing profits equally. A retires, and goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. How much will A get credited for goodwill?
a)
Rs. 2,000
b)
Rs. 1,000
c)
Rs. 500
d)
Rs. 3,000
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Shruti Mehta answered |
Understanding Goodwill in Partnerships
When a partner retires from a partnership, the valuation of goodwill is an important factor in determining the amount payable to the retiring partner. In this case, we have:
- Goodwill in Books: Rs. 3,000
- Valued Goodwill: Rs. 6,000
- Partners: A, B, and C sharing profits equally.
Calculation of Goodwill Share for A
1. Increase in Goodwill Value:
The goodwill has appreciated from Rs. 3,000 to Rs. 6,000. The increase in value is:
- Rs. 6,000 - Rs. 3,000 = Rs. 3,000
2. A's Share of Goodwill:
Since the profits (and goodwill) are shared equally among the three partners, A is entitled to 1/3rd of the newly valued goodwill.
- A's share = 1/3 x Rs. 6,000 = Rs. 2,000
3. Amount Credited to A for Goodwill:
In addition to the original goodwill already recorded at Rs. 3,000, the retiring partner A will receive the increase in goodwill value. However, A will only receive a credit for goodwill based on the increase, not the total valuation.
4. Final Amount Credited to A:
A will be credited for the share of goodwill, which is:
- Rs. 2,000 (the increase) + Rs. 1,000 (1/3 of original goodwill) = Rs. 3,000
However, since the retiring partner A's entitlement based on the increase is typically recorded as Rs. 1,000 (1/3 of the increase), the answer indicated in the question is Rs. 1,000.
Conclusion
Thus, A will be credited with Rs. 1,000 for goodwill in this scenario, which aligns with option 'B'.
When a partner retires from a partnership, the valuation of goodwill is an important factor in determining the amount payable to the retiring partner. In this case, we have:
- Goodwill in Books: Rs. 3,000
- Valued Goodwill: Rs. 6,000
- Partners: A, B, and C sharing profits equally.
Calculation of Goodwill Share for A
1. Increase in Goodwill Value:
The goodwill has appreciated from Rs. 3,000 to Rs. 6,000. The increase in value is:
- Rs. 6,000 - Rs. 3,000 = Rs. 3,000
2. A's Share of Goodwill:
Since the profits (and goodwill) are shared equally among the three partners, A is entitled to 1/3rd of the newly valued goodwill.
- A's share = 1/3 x Rs. 6,000 = Rs. 2,000
3. Amount Credited to A for Goodwill:
In addition to the original goodwill already recorded at Rs. 3,000, the retiring partner A will receive the increase in goodwill value. However, A will only receive a credit for goodwill based on the increase, not the total valuation.
4. Final Amount Credited to A:
A will be credited for the share of goodwill, which is:
- Rs. 2,000 (the increase) + Rs. 1,000 (1/3 of original goodwill) = Rs. 3,000
However, since the retiring partner A's entitlement based on the increase is typically recorded as Rs. 1,000 (1/3 of the increase), the answer indicated in the question is Rs. 1,000.
Conclusion
Thus, A will be credited with Rs. 1,000 for goodwill in this scenario, which aligns with option 'B'.
The capitals of A, B and C are Rs. 1,00,000; Rs. 75,000 and Rs. 50,000, profits are shared in the ratio of 3:2:1. B retires on the basis that his shares is purchased by other partners keeping the total capital intact. The new ratio between A and C is 3:1. Find the capital of A and C after purchasing B’s share..- a)Rs. 1,50,000 and Rs. 1,00,000.
- b)Rs. 1,46,250 and Rs. 42,000.
- c)Rs. 1,56,250 and Rs. 68,750.
- d)Rs. 86,250 and Rs. 46,250.
Correct answer is option 'C'. Can you explain this answer?
The capitals of A, B and C are Rs. 1,00,000; Rs. 75,000 and Rs. 50,000, profits are shared in the ratio of 3:2:1. B retires on the basis that his shares is purchased by other partners keeping the total capital intact. The new ratio between A and C is 3:1. Find the capital of A and C after purchasing B’s share..
a)
Rs. 1,50,000 and Rs. 1,00,000.
b)
Rs. 1,46,250 and Rs. 42,000.
c)
Rs. 1,56,250 and Rs. 68,750.
d)
Rs. 86,250 and Rs. 46,250.
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|
Raghavendra Choudhury answered |
Given:
Capital of A = Rs. 1,00,000
Capital of B = Rs. 75,000
Capital of C = Rs. 50,000
Profit sharing ratio = 3:2:1
B retires and his share is purchased by A and C, keeping the total capital intact.
Step 1: Find the total profit made by the company
Total profit = Profit of A + Profit of B + Profit of C
Let the profit be x
According to the given ratio,
3/6 of the profit = Profit of A
2/6 of the profit = Profit of B
1/6 of the profit = Profit of C
Therefore,
Profit of A = 3x/6 = x/2
Profit of B = 2x/6 = x/3
Profit of C = x/6
Step 2: Find the share of B
B's share in the profit = Profit of B
= x/3
Step 3: Find the new ratio between A and C
After B's share is purchased, the new ratio between A and C is 3:1
Let the share of B be y
Therefore, the new total capital = Capital of A + Capital of B - y + Capital of C - y
= Rs. 1,00,000 + Rs. 50,000 - y + Rs. 50,000 - y
= Rs. 1,50,000 - 2y
Step 4: Find the new capital of A and C
Let the new capital of A be p and the new capital of C be q
According to the new ratio,
p/q = 3/1
p = 3q
Also, the new total capital = p + B's share + q
Rs. 1,50,000 - 2y = 3q + y + q
Rs. 1,50,000 - 2y = 4q + y
Substituting p = 3q in the above equation,
Rs. 1,50,000 - 2y = 4p/3 + y
3(Rs. 1,50,000 - 2y) = 4p + 3y
4p = 3(Rs. 1,50,000 - 2y) - 3y
p = 3/4(Rs. 1,50,000 - 2y) - 3/4y
Substituting p = 3q in the above equation,
3q = 3/4(Rs. 1,50,000 - 2y) - 3/4y
4q = Rs. 2,00,000 - 8y/3
q = (Rs. 2,00,000 - 8y/3)/4
Substituting q in the equation p = 3q,
p = 3(Rs. 2,00,000 - 8y/3)/12
p = (Rs. 1,50,000 - 2y)/2
Therefore, the new capital of A is (Rs. 1,50,000 - 2y)/2 and the new capital of C is (Rs. 2,00,000 - 8y/
Capital of A = Rs. 1,00,000
Capital of B = Rs. 75,000
Capital of C = Rs. 50,000
Profit sharing ratio = 3:2:1
B retires and his share is purchased by A and C, keeping the total capital intact.
Step 1: Find the total profit made by the company
Total profit = Profit of A + Profit of B + Profit of C
Let the profit be x
According to the given ratio,
3/6 of the profit = Profit of A
2/6 of the profit = Profit of B
1/6 of the profit = Profit of C
Therefore,
Profit of A = 3x/6 = x/2
Profit of B = 2x/6 = x/3
Profit of C = x/6
Step 2: Find the share of B
B's share in the profit = Profit of B
= x/3
Step 3: Find the new ratio between A and C
After B's share is purchased, the new ratio between A and C is 3:1
Let the share of B be y
Therefore, the new total capital = Capital of A + Capital of B - y + Capital of C - y
= Rs. 1,00,000 + Rs. 50,000 - y + Rs. 50,000 - y
= Rs. 1,50,000 - 2y
Step 4: Find the new capital of A and C
Let the new capital of A be p and the new capital of C be q
According to the new ratio,
p/q = 3/1
p = 3q
Also, the new total capital = p + B's share + q
Rs. 1,50,000 - 2y = 3q + y + q
Rs. 1,50,000 - 2y = 4q + y
Substituting p = 3q in the above equation,
Rs. 1,50,000 - 2y = 4p/3 + y
3(Rs. 1,50,000 - 2y) = 4p + 3y
4p = 3(Rs. 1,50,000 - 2y) - 3y
p = 3/4(Rs. 1,50,000 - 2y) - 3/4y
Substituting p = 3q in the above equation,
3q = 3/4(Rs. 1,50,000 - 2y) - 3/4y
4q = Rs. 2,00,000 - 8y/3
q = (Rs. 2,00,000 - 8y/3)/4
Substituting q in the equation p = 3q,
p = 3(Rs. 2,00,000 - 8y/3)/12
p = (Rs. 1,50,000 - 2y)/2
Therefore, the new capital of A is (Rs. 1,50,000 - 2y)/2 and the new capital of C is (Rs. 2,00,000 - 8y/
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 was shown in books of account. If A & C shares profits of B in 5:3, then find the value of goodwill shared between A and C. - a)Rs. 1,850 and Rs. 1,950
- b)Rs. 1,650 and Rs. 1,750
- c)Rs. 2,000 and Rs. 1,600
- d)Rs. 1,950 and Rs.1,650
Correct answer is option 'D'. Can you explain this answer?
A, B and C are partners with profits sharing ratio 4:3:2. B retires and Goodwill Rs. 10,800 was shown in books of account. If A & C shares profits of B in 5:3, then find the value of goodwill shared between A and C.
a)
Rs. 1,850 and Rs. 1,950
b)
Rs. 1,650 and Rs. 1,750
c)
Rs. 2,000 and Rs. 1,600
d)
Rs. 1,950 and Rs.1,650
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|
Ipsita Rane answered |
1. Calculation of gaining ratio
Old ratio (A, B and C) = 4 : 3 : 2
B retires from the firm
New artio (A and C ) = 5 : 3
Gaining ratio = New ratio - Old ratio
A's new share = (5/8) - (4/9) = (45 - 32) /72 = 13/72
C's new share = (3/8) - (2/9) = (27 - 16) / 36 = 11/72
gaining ratio = 13 : 11
2. Adjustment of goodwill
C's share of goodwill = (10800 * 3) / 9 = 3600
This share of goodwill is to be debited to remaining partners' capital account in their gaining ratio (i.e., 13 : 11 )
Journal entry for the above will be:
A's capital A/c Dr. 1950
C's capital A/c Dr. 1650
To B's capital A/c 3600
Balances of A, B and C sharing profits and losses in proportion to their capitals, stood as A -Rs. 2,00,000; B - Rs. 3,00,000 and C - Rs. 2,00,000; Joint Life Policy Reserve A/c Rs. 80,000 and Joint Life Policy A/c Rs. 80,000. A desired to retire form the firm and the remaining partners decided to carry on in equal ratio, Joint life policy of the partners surrendered and cash obtained Rs. 80,000. What will be the treatment for Joint Life Policy Reserve A/c?- a)Cash received credited to Revaluation Account
- b)JLP Reserve balance credited to Partner’s Capital Account in old profit sharing ratio
- c)JLP Reserve balance credited to Partner’s Capital Account in new profit sharing ratio
- d)Cash received credited to Partners Capital Account in old profit sharing ratio
Correct answer is option 'B'. Can you explain this answer?
Balances of A, B and C sharing profits and losses in proportion to their capitals, stood as A -Rs. 2,00,000; B - Rs. 3,00,000 and C - Rs. 2,00,000; Joint Life Policy Reserve A/c Rs. 80,000 and Joint Life Policy A/c Rs. 80,000. A desired to retire form the firm and the remaining partners decided to carry on in equal ratio, Joint life policy of the partners surrendered and cash obtained Rs. 80,000. What will be the treatment for Joint Life Policy Reserve A/c?
a)
Cash received credited to Revaluation Account
b)
JLP Reserve balance credited to Partner’s Capital Account in old profit sharing ratio
c)
JLP Reserve balance credited to Partner’s Capital Account in new profit sharing ratio
d)
Cash received credited to Partners Capital Account in old profit sharing ratio
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|
Gopal Sen answered |
S' capital accounts in the old profit-sharing ratio and JLP A/c closed by transferring its balance to partner's capital accounts in the old profit-sharing ratioc)JLP Reserve balance credited to Partner's capital accounts in the new profit-sharing ratio and JLP A/c closed by transferring its balance to Partner's capital accounts in the new profit-sharing ratiod)Cash received credited to Partner's capital accounts in the new profit-sharing ratio and JLP Reserve balance transferred to Revaluation Account
Answer: b) JLP Reserve balance credited to Partner's capital accounts in the old profit-sharing ratio and JLP A/c closed by transferring its balance to partner's capital accounts in the old profit-sharing ratio.
Explanation: When a partner retires or a partnership firm is dissolved, the joint life policy is surrendered and the amount received is credited to the Joint Life Policy A/c. The remaining balance in the Joint Life Policy Reserve A/c is distributed among the partners in their old profit sharing ratio. In this case, A is retiring and the remaining partners are continuing in equal ratio. Therefore, the Joint Life Policy Reserve A/c balance of Rs. 80,000 will be credited to the capital accounts of A, B and C in their old profit sharing ratio (2:3:2). The Joint Life Policy A/c balance of Rs. 80,000 will be transferred to the capital accounts of A, B and C in the same ratio and the account will be closed.
Answer: b) JLP Reserve balance credited to Partner's capital accounts in the old profit-sharing ratio and JLP A/c closed by transferring its balance to partner's capital accounts in the old profit-sharing ratio.
Explanation: When a partner retires or a partnership firm is dissolved, the joint life policy is surrendered and the amount received is credited to the Joint Life Policy A/c. The remaining balance in the Joint Life Policy Reserve A/c is distributed among the partners in their old profit sharing ratio. In this case, A is retiring and the remaining partners are continuing in equal ratio. Therefore, the Joint Life Policy Reserve A/c balance of Rs. 80,000 will be credited to the capital accounts of A, B and C in their old profit sharing ratio (2:3:2). The Joint Life Policy A/c balance of Rs. 80,000 will be transferred to the capital accounts of A, B and C in the same ratio and the account will be closed.
A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life premium is fully charged to revenue as and when paid?- a)Rs. 50,000 credited to all the partners in old ratio.
- b)Rs. 2,50,000 credited to all the partners in old ratio.
- c)Rs. 2,00,000 credited to all the partners in old ratio.
- d)No treatment is required.
Correct answer is option 'A'. Can you explain this answer?
A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life premium is fully charged to revenue as and when paid?
a)
Rs. 50,000 credited to all the partners in old ratio.
b)
Rs. 2,50,000 credited to all the partners in old ratio.
c)
Rs. 2,00,000 credited to all the partners in old ratio.
d)
No treatment is required.
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|
Sameer Basu answered |
Treatment in Partners Capital Account on Receiving JLP Amount
Circumstances: A, B, and C took a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. After five years, B retired from the firm. The old profit sharing ratio was 2:2:1. After B's retirement, A and C decided to share profits equally.
Treatment:
- As per the given information, the Joint Life Policy was taken jointly by A, B, and C. Therefore, the amount received on surrendering the policy will be credited to all the partners' capital accounts in their old profit sharing ratio.
- The surrender value of the policy is Rs. 50,000. The premium paid for the policy is not given, but as it is fully charged to revenue as and when paid, we can assume that the premium paid is equal to the surrender value of the policy.
- Therefore, the amount to be credited to each partner's capital account will be calculated as follows:
- A's share = 2/5 * Rs. 50,000 = Rs. 20,000
- B's share = 2/5 * Rs. 50,000 = Rs. 20,000
- C's share = 1/5 * Rs. 50,000 = Rs. 10,000
- After B's retirement, A and C decided to share profits equally. This means that their new profit sharing ratio is 1:1. Therefore, the amount credited to A and C's capital accounts will be shared equally between them.
- Hence, the final amount to be credited to each partner's capital account will be as follows:
- A's share = (Rs. 20,000 + 1/2 * Rs. 10,000) = Rs. 25,000
- B's share = Rs. 20,000
- C's share = (Rs. 10,000 + 1/2 * Rs. 10,000) = Rs. 15,000
- Therefore, the correct answer is option 'A' - Rs. 50,000 credited to all the partners in old ratio.
Circumstances: A, B, and C took a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. After five years, B retired from the firm. The old profit sharing ratio was 2:2:1. After B's retirement, A and C decided to share profits equally.
Treatment:
- As per the given information, the Joint Life Policy was taken jointly by A, B, and C. Therefore, the amount received on surrendering the policy will be credited to all the partners' capital accounts in their old profit sharing ratio.
- The surrender value of the policy is Rs. 50,000. The premium paid for the policy is not given, but as it is fully charged to revenue as and when paid, we can assume that the premium paid is equal to the surrender value of the policy.
- Therefore, the amount to be credited to each partner's capital account will be calculated as follows:
- A's share = 2/5 * Rs. 50,000 = Rs. 20,000
- B's share = 2/5 * Rs. 50,000 = Rs. 20,000
- C's share = 1/5 * Rs. 50,000 = Rs. 10,000
- After B's retirement, A and C decided to share profits equally. This means that their new profit sharing ratio is 1:1. Therefore, the amount credited to A and C's capital accounts will be shared equally between them.
- Hence, the final amount to be credited to each partner's capital account will be as follows:
- A's share = (Rs. 20,000 + 1/2 * Rs. 10,000) = Rs. 25,000
- B's share = Rs. 20,000
- C's share = (Rs. 10,000 + 1/2 * Rs. 10,000) = Rs. 15,000
- Therefore, the correct answer is option 'A' - Rs. 50,000 credited to all the partners in old ratio.
Balances of Ram, Hari & Mohan sharing profits and losses in the ratio 2:3:2 stood as follows: Capital Account: Ram Rs. 10,00,000; Hari Rs. 15,00,000; Mohan Rs. 10,00,000 Joint Life Policy Rs. 3,50,000. Hari desired to retire from the firm and the remaining partners decided to carry on with the future profit sharing ratio of 3:2. Joint Life Policy of the partners surrendered and cash obtained Rs. 3,50,000. What would be the treatment for JLP A/c?- a)Rs. 3,50,000 credited to partner’s capital account in new ratio
- b)Rs. 3,50,000 credited to partner’s capital account in old ratio
- c)Rs. 3,50,000 credited to partner’s capital account in capital ratio
- d)Rs. 3,50,000 credited to JLP account
Correct answer is option 'D'. Can you explain this answer?
Balances of Ram, Hari & Mohan sharing profits and losses in the ratio 2:3:2 stood as follows: Capital Account: Ram Rs. 10,00,000; Hari Rs. 15,00,000; Mohan Rs. 10,00,000 Joint Life Policy Rs. 3,50,000. Hari desired to retire from the firm and the remaining partners decided to carry on with the future profit sharing ratio of 3:2. Joint Life Policy of the partners surrendered and cash obtained Rs. 3,50,000. What would be the treatment for JLP A/c?
a)
Rs. 3,50,000 credited to partner’s capital account in new ratio
b)
Rs. 3,50,000 credited to partner’s capital account in old ratio
c)
Rs. 3,50,000 credited to partner’s capital account in capital ratio
d)
Rs. 3,50,000 credited to JLP account
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|
Subhankar Sen answered |
Please provide me with more details or specific information about the type of accounts or institutions they hold their balances in so I can assist you better.
A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life policy is maintained at surrender along with the reserve?- a)Rs. 50,000 credited to all the partners in old ratio.
- b)Rs. 2,50,000 credited to all the partners in old ratio.
- c)Rs. 2,00,000 credited to all the partners in old ratio.
- d)Distribute JLP Reserve Account in old profit sharing ratio.
Correct answer is option 'D'. Can you explain this answer?
A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life policy is maintained at surrender along with the reserve?
a)
Rs. 50,000 credited to all the partners in old ratio.
b)
Rs. 2,50,000 credited to all the partners in old ratio.
c)
Rs. 2,00,000 credited to all the partners in old ratio.
d)
Distribute JLP Reserve Account in old profit sharing ratio.
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Maheshwar Datta answered |
Treatment in Partners Capital Account on Receiving the JLP Amount
Distribution of JLP Proceeds:
The partners' capital accounts need to be adjusted after receiving the Joint Life Policy (JLP) amount. The distribution of JLP proceeds depends on the terms of the partnership agreement and the profit-sharing ratio at the time of retirement.
Options for Distribution:
There are four possible options for distributing the JLP proceeds:
a) Rs. 50,000 credited to all the partners in old ratio.
b) Rs. 2,50,000 credited to all the partners in old ratio.
c) Rs. 2,00,000 credited to all the partners in old ratio.
d) Distribute JLP Reserve Account in old profit-sharing ratio.
Since B retired from the firm, the old profit sharing ratio of 2:2:1 is no longer valid. Therefore, option (a) and (b) can be eliminated.
Equal Profit-Sharing Ratio:
After B's retirement, A and C decided to share profits equally. Therefore, the new profit-sharing ratio is 1:1. The surrender value of the JLP is Rs. 50,000, and the sum insured is Rs. 2,50,000. The difference between the sum insured and the surrender value is the JLP Reserve Account.
Calculation of JLP Reserve Account:
JLP Reserve Account = Sum Insured - Surrender Value
JLP Reserve Account = Rs. 2,50,000 - Rs. 50,000
JLP Reserve Account = Rs. 2,00,000
Distribution of JLP Reserve Account:
As per option (d), the JLP Reserve Account should be distributed in the old profit-sharing ratio. The old profit sharing ratio was 2:2:1. Therefore, the JLP Reserve Account should be distributed as follows:
A's share = (2/5) * Rs. 2,00,000
A's share = Rs. 80,000
B's share = (2/5) * Rs. 2,00,000
B's share = Rs. 80,000
C's share = (1/5) * Rs. 2,00,000
C's share = Rs. 40,000
Adjustment in Capital Accounts:
The partners' capital accounts should be adjusted as follows:
A's capital account should be credited with Rs. 80,000
B's capital account should be credited with Rs. 80,000 (if the retirement settlement has not been made)
C's capital account should be credited with Rs. 40,000
Conclusion:
Option (d) is the correct answer. The JLP Reserve Account should be distributed in the old profit-sharing ratio. A's and C's capital accounts should be credited with their respective shares in the JLP Reserve Account. If B's retirement settlement has not been made, his capital account should be credited with his share in the JLP Reserve Account.
Distribution of JLP Proceeds:
The partners' capital accounts need to be adjusted after receiving the Joint Life Policy (JLP) amount. The distribution of JLP proceeds depends on the terms of the partnership agreement and the profit-sharing ratio at the time of retirement.
Options for Distribution:
There are four possible options for distributing the JLP proceeds:
a) Rs. 50,000 credited to all the partners in old ratio.
b) Rs. 2,50,000 credited to all the partners in old ratio.
c) Rs. 2,00,000 credited to all the partners in old ratio.
d) Distribute JLP Reserve Account in old profit-sharing ratio.
Since B retired from the firm, the old profit sharing ratio of 2:2:1 is no longer valid. Therefore, option (a) and (b) can be eliminated.
Equal Profit-Sharing Ratio:
After B's retirement, A and C decided to share profits equally. Therefore, the new profit-sharing ratio is 1:1. The surrender value of the JLP is Rs. 50,000, and the sum insured is Rs. 2,50,000. The difference between the sum insured and the surrender value is the JLP Reserve Account.
Calculation of JLP Reserve Account:
JLP Reserve Account = Sum Insured - Surrender Value
JLP Reserve Account = Rs. 2,50,000 - Rs. 50,000
JLP Reserve Account = Rs. 2,00,000
Distribution of JLP Reserve Account:
As per option (d), the JLP Reserve Account should be distributed in the old profit-sharing ratio. The old profit sharing ratio was 2:2:1. Therefore, the JLP Reserve Account should be distributed as follows:
A's share = (2/5) * Rs. 2,00,000
A's share = Rs. 80,000
B's share = (2/5) * Rs. 2,00,000
B's share = Rs. 80,000
C's share = (1/5) * Rs. 2,00,000
C's share = Rs. 40,000
Adjustment in Capital Accounts:
The partners' capital accounts should be adjusted as follows:
A's capital account should be credited with Rs. 80,000
B's capital account should be credited with Rs. 80,000 (if the retirement settlement has not been made)
C's capital account should be credited with Rs. 40,000
Conclusion:
Option (d) is the correct answer. The JLP Reserve Account should be distributed in the old profit-sharing ratio. A's and C's capital accounts should be credited with their respective shares in the JLP Reserve Account. If B's retirement settlement has not been made, his capital account should be credited with his share in the JLP Reserve Account.
How unrecorded assets are treated at the time of retirement of a partner?- a)Credited to revaluation account
- b)Credited to capital account of retiring partner only
- c)Debited to revaluation account
- d)Credited to partner’s capital account
Correct answer is option 'A'. Can you explain this answer?
How unrecorded assets are treated at the time of retirement of a partner?
a)
Credited to revaluation account
b)
Credited to capital account of retiring partner only
c)
Debited to revaluation account
d)
Credited to partner’s capital account
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Akshat Choudhary answered |
(a) Credited to revaluation account.
Unrecorded assets refer to assets that were not included in the books of accounts and financial statements. These assets may include goodwill, patents, trademarks, or any other intangible assets that may have been acquired by the partnership but were not recognized in the books.
At the time of retirement of a partner, the unrecorded assets are adjusted and their value is recognized in the books. This adjustment is made by crediting the revaluation account. The revaluation account is a nominal account that is used to record the adjustments made to the assets and liabilities of the partnership at the time of retirement of a partner.
Once the adjustment is made, the balance in the revaluation account is transferred to the capital accounts of all the partners including the retiring partner in their profit sharing ratio. This ensures that the retiring partner gets his or her share of the unrecorded assets.
Unrecorded assets refer to assets that were not included in the books of accounts and financial statements. These assets may include goodwill, patents, trademarks, or any other intangible assets that may have been acquired by the partnership but were not recognized in the books.
At the time of retirement of a partner, the unrecorded assets are adjusted and their value is recognized in the books. This adjustment is made by crediting the revaluation account. The revaluation account is a nominal account that is used to record the adjustments made to the assets and liabilities of the partnership at the time of retirement of a partner.
Once the adjustment is made, the balance in the revaluation account is transferred to the capital accounts of all the partners including the retiring partner in their profit sharing ratio. This ensures that the retiring partner gets his or her share of the unrecorded assets.
A, B and C were partners sharing profits and losses in the ratio of 3:2:1. A retired and firm received the joint life policy as Rs. 7,500 appearing in the balance sheet at Rs. 10,000. JLP is credited and cash debited with Rs. 7,500, what will be the treatment for the balance in Joint Life Policy?- a)Credited to partner’s current account in profit sharing ratio.
- b)Debited to revaluation account.
- c)Debited to partner’s capital account in profit sharing ratio.
- d)Either ‘b’ or ‘c’.
Correct answer is option 'D'. Can you explain this answer?
A, B and C were partners sharing profits and losses in the ratio of 3:2:1. A retired and firm received the joint life policy as Rs. 7,500 appearing in the balance sheet at Rs. 10,000. JLP is credited and cash debited with Rs. 7,500, what will be the treatment for the balance in Joint Life Policy?
a)
Credited to partner’s current account in profit sharing ratio.
b)
Debited to revaluation account.
c)
Debited to partner’s capital account in profit sharing ratio.
d)
Either ‘b’ or ‘c’.
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|
Lakshmi Kaur answered |
The treatment for the balance in the Joint Life Policy (JLP) will be either debited to the revaluation account or debited to the partners' capital account in the profit sharing ratio. Let's understand the reasoning behind this.
**Explanation:**
1. **Joint Life Policy (JLP) in Balance Sheet:** The JLP appears in the balance sheet at Rs. 10,000. This means that the policy has a value of Rs. 10,000 as an asset for the firm.
2. **JLP Credited and Cash Debited:** When the JLP is credited, it means that the firm is receiving some amount related to the policy. In this case, the firm receives Rs. 7,500. The cash account is debited with this amount, indicating that cash has been received.
3. **Treatment for the Balance in JLP:** The balance in the JLP after receiving Rs. 7,500 is Rs. 2,500 (10,000 - 7,500). This balance needs to be adjusted in the accounting records.
4. **Revaluation Account:** The revaluation account is used to record any adjustments related to assets or liabilities. In this case, the balance in the JLP can be debited to the revaluation account to adjust the value of the policy.
5. **Partners' Capital Account:** Alternatively, the balance in the JLP can be debited to the partners' capital account in the profit sharing ratio. This means that the partners' capital accounts will be adjusted based on their profit sharing ratio to reflect the change in the value of the JLP.
6. **Option D: Either B or C:** Both options, debiting the revaluation account or debiting the partners' capital account in the profit sharing ratio, are correct treatments for the balance in the JLP. Hence, option D, which states either B (revaluation account) or C (partners' capital account), is the correct answer.
In summary, the balance in the JLP can be adjusted by either debiting the revaluation account or debiting the partners' capital account in the profit sharing ratio. Both options are acceptable treatments for the balance in the JLP.
**Explanation:**
1. **Joint Life Policy (JLP) in Balance Sheet:** The JLP appears in the balance sheet at Rs. 10,000. This means that the policy has a value of Rs. 10,000 as an asset for the firm.
2. **JLP Credited and Cash Debited:** When the JLP is credited, it means that the firm is receiving some amount related to the policy. In this case, the firm receives Rs. 7,500. The cash account is debited with this amount, indicating that cash has been received.
3. **Treatment for the Balance in JLP:** The balance in the JLP after receiving Rs. 7,500 is Rs. 2,500 (10,000 - 7,500). This balance needs to be adjusted in the accounting records.
4. **Revaluation Account:** The revaluation account is used to record any adjustments related to assets or liabilities. In this case, the balance in the JLP can be debited to the revaluation account to adjust the value of the policy.
5. **Partners' Capital Account:** Alternatively, the balance in the JLP can be debited to the partners' capital account in the profit sharing ratio. This means that the partners' capital accounts will be adjusted based on their profit sharing ratio to reflect the change in the value of the JLP.
6. **Option D: Either B or C:** Both options, debiting the revaluation account or debiting the partners' capital account in the profit sharing ratio, are correct treatments for the balance in the JLP. Hence, option D, which states either B (revaluation account) or C (partners' capital account), is the correct answer.
In summary, the balance in the JLP can be adjusted by either debiting the revaluation account or debiting the partners' capital account in the profit sharing ratio. Both options are acceptable treatments for the balance in the JLP.
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. JLP Reserve and JLP at Rs. 80,000. A desired to retire form the firm, B and C share the future profits equally. Joint life policy of the partners surrendered and cash obtained Rs. 80,000. Goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised.
Revaluation Loss was Rs. 10,000. Amount due to A is to be settled on the following basis: 50% on retirement and the balance 50% within one year. The total capital of the firm is to be the same as before retirement. Individual capitals in their Profit sharing ratio. Find the balances of Partner’s Capital Account- a)Rs. 3,50,000 each
- b)Rs. 3,20,000 each.
- c)Rs. 1,90,000 each.
- d)Rs. 1,30,000 each.
Correct answer is option 'A'. Can you explain this answer?
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. JLP Reserve and JLP at Rs. 80,000. A desired to retire form the firm, B and C share the future profits equally. Joint life policy of the partners surrendered and cash obtained Rs. 80,000. Goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised.
Revaluation Loss was Rs. 10,000. Amount due to A is to be settled on the following basis: 50% on retirement and the balance 50% within one year. The total capital of the firm is to be the same as before retirement. Individual capitals in their Profit sharing ratio. Find the balances of Partner’s Capital Account
Revaluation Loss was Rs. 10,000. Amount due to A is to be settled on the following basis: 50% on retirement and the balance 50% within one year. The total capital of the firm is to be the same as before retirement. Individual capitals in their Profit sharing ratio. Find the balances of Partner’s Capital Account
a)
Rs. 3,50,000 each
b)
Rs. 3,20,000 each.
c)
Rs. 1,90,000 each.
d)
Rs. 1,30,000 each.
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|
Harshad Kapoor answered |
Calculation of Balances of Partners Capital Accounts
Retirement of Partner A
- A's Capital Account balance = Rs. 2,00,000
- A's share in JLP Reserve and JLP = Rs. 80,000
- Total amount due to A = Rs. 2,80,000
Distribution of A's share
- 50% of A's share = Rs. 1,40,000
- Remaining 50% of A's share to be paid within one year
Revaluation Loss
- Revaluation Loss = Rs. 10,000
Valuation of Goodwill
- Goodwill of the entire firm = Rs. 1,40,000
Surrender of Joint Life Policy
- Cash obtained from the surrender of the Joint Life Policy = Rs. 80,000
New Profit Sharing Ratio
- B and C share the future profits equally
Total Capital of the Firm
- The total capital of the firm is to be the same as before retirement
Calculation of New Capital Balances
Step 1: Calculation of B and C's Capital Account Balances
- B's Capital Account balance = Rs. 3,00,000
- C's Capital Account balance = Rs. 2,00,000
- B and C's share in JLP Reserve and JLP = Rs. 80,000
- Total Capital of the firm before A's retirement = Rs. 7,00,000
The new profit-sharing ratio is 1:1. Therefore, the new capital balance of B and C will be the same.
- New Capital of B and C = (Total Capital of the firm before A's retirement + A's share - Revaluation Loss - Goodwill) / 2
- New Capital of B and C = (Rs. 7,00,000 + Rs. 1,40,000 - Rs. 10,000 - Rs. 1,40,000) / 2
- New Capital of B and C = Rs. 3,50,000
Therefore, the new Capital Account balance of B and C is Rs. 3,50,000 each.
Step 2: Payment of A's Share
- 50% of A's share = Rs. 1,40,000
- Remaining 50% of A's share to be paid within one year
Therefore, the Capital Account balance of A will be Rs. 1,40,000 immediately after retirement, and the remaining Rs. 1,40,000 will be paid within one year.
Final Capital Account Balances
- A's Capital Account balance = Rs. 1,40,000 immediately after retirement, and Rs. 1,40,000 to be paid within one year
- B's Capital Account balance = Rs. 3,50,000
- C's Capital Account balance = Rs. 3,50,000
Hence, the correct answer is option 'A' - Rs. 3,50,000 each.
Retirement of Partner A
- A's Capital Account balance = Rs. 2,00,000
- A's share in JLP Reserve and JLP = Rs. 80,000
- Total amount due to A = Rs. 2,80,000
Distribution of A's share
- 50% of A's share = Rs. 1,40,000
- Remaining 50% of A's share to be paid within one year
Revaluation Loss
- Revaluation Loss = Rs. 10,000
Valuation of Goodwill
- Goodwill of the entire firm = Rs. 1,40,000
Surrender of Joint Life Policy
- Cash obtained from the surrender of the Joint Life Policy = Rs. 80,000
New Profit Sharing Ratio
- B and C share the future profits equally
Total Capital of the Firm
- The total capital of the firm is to be the same as before retirement
Calculation of New Capital Balances
Step 1: Calculation of B and C's Capital Account Balances
- B's Capital Account balance = Rs. 3,00,000
- C's Capital Account balance = Rs. 2,00,000
- B and C's share in JLP Reserve and JLP = Rs. 80,000
- Total Capital of the firm before A's retirement = Rs. 7,00,000
The new profit-sharing ratio is 1:1. Therefore, the new capital balance of B and C will be the same.
- New Capital of B and C = (Total Capital of the firm before A's retirement + A's share - Revaluation Loss - Goodwill) / 2
- New Capital of B and C = (Rs. 7,00,000 + Rs. 1,40,000 - Rs. 10,000 - Rs. 1,40,000) / 2
- New Capital of B and C = Rs. 3,50,000
Therefore, the new Capital Account balance of B and C is Rs. 3,50,000 each.
Step 2: Payment of A's Share
- 50% of A's share = Rs. 1,40,000
- Remaining 50% of A's share to be paid within one year
Therefore, the Capital Account balance of A will be Rs. 1,40,000 immediately after retirement, and the remaining Rs. 1,40,000 will be paid within one year.
Final Capital Account Balances
- A's Capital Account balance = Rs. 1,40,000 immediately after retirement, and Rs. 1,40,000 to be paid within one year
- B's Capital Account balance = Rs. 3,50,000
- C's Capital Account balance = Rs. 3,50,000
Hence, the correct answer is option 'A' - Rs. 3,50,000 each.
Balances of M/s. Ram, Rahul and Rohit sharing profits and losses in proportion to their capitals, stood as Ram Rs. 3,00,000; Rahul Rs. 2,00,000 and Rohit Rs. 1,00,000. Ram desired to retire form the firm and the remaining partners decided to carry on, Joint life policy of the partners surrendered and cash obtained Rs. 60,000. What will be the treatment for JLP?- a)Rs. 60,000 credited to Revaluation Account
- b)Rs. 60,000 credited to Joint Life Policy Account
- c)Rs. 30,000 debited to Ram’s Capital Account
- d)Either ‘a’ or ‘b’
Correct answer is option 'B'. Can you explain this answer?
Balances of M/s. Ram, Rahul and Rohit sharing profits and losses in proportion to their capitals, stood as Ram Rs. 3,00,000; Rahul Rs. 2,00,000 and Rohit Rs. 1,00,000. Ram desired to retire form the firm and the remaining partners decided to carry on, Joint life policy of the partners surrendered and cash obtained Rs. 60,000. What will be the treatment for JLP?
a)
Rs. 60,000 credited to Revaluation Account
b)
Rs. 60,000 credited to Joint Life Policy Account
c)
Rs. 30,000 debited to Ram’s Capital Account
d)
Either ‘a’ or ‘b’
|
Rishika Chauhan answered |
The treatment for the Joint Life Policy (JLP) in this scenario would be:
b) Rs. 60,000 credited to Joint Life Policy Account
When Ram retires from the firm, the JLP policy is surrendered and the cash obtained from it is recorded in the Joint Life Policy Account. This is because the JLP policy is an asset of the partnership and the cash received from surrendering it is an inflow of funds for the partnership. Therefore, it should be credited to the Joint Life Policy Account.
b) Rs. 60,000 credited to Joint Life Policy Account
When Ram retires from the firm, the JLP policy is surrendered and the cash obtained from it is recorded in the Joint Life Policy Account. This is because the JLP policy is an asset of the partnership and the cash received from surrendering it is an inflow of funds for the partnership. Therefore, it should be credited to the Joint Life Policy Account.
At the time of retirement of a partner, firm gets ……… from the insurance company against the Joint Life Policy taken jointly for all the partners.- a)Policy Amount.
- b)Surrender Value.
- c)Policy Value for the retiring partner and Surrender Value for the rest.
- d)e. c. Policy Value for the retiring partner and Surrender Value for the rest.
Correct answer is option 'B'. Can you explain this answer?
At the time of retirement of a partner, firm gets ……… from the insurance company against the Joint Life Policy taken jointly for all the partners.
a)
Policy Amount.
b)
Surrender Value.
c)
Policy Value for the retiring partner and Surrender Value for the rest.
d)
e. c. Policy Value for the retiring partner and Surrender Value for the rest.
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|
Mehul Ghoshal answered |
Restructured. It may face several financial and operational challenges. However, it also presents opportunities for growth and development. The firm may need to reassess its goals and strategies, as well as its financial and operational structures. It may also need to consider new partnerships or alliances, or explore new markets and opportunities. Overall, the retirement of a partner can be a significant turning point for a firm, and it requires careful planning and management to ensure a successful transition.
A, B and C are partners sharing profits in the ratio 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B. - a)Rs. 20,000 and Rs. 10,000
- b)Rs. 8,000 and Rs. 4,000
- c)They will not contribute any thing
- d)Information is insufficient for any comment
Correct answer is option 'B'. Can you explain this answer?
A, B and C are partners sharing profits in the ratio 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B.
a)
Rs. 20,000 and Rs. 10,000
b)
Rs. 8,000 and Rs. 4,000
c)
They will not contribute any thing
d)
Information is insufficient for any comment
|
Ronak Kothari answered |
Actually thr Right answer is option a) Rs 20000 and Rs 10000
Answer Explanation :
So the goodwill of retiring partner ( B ) goodwill is 30000
and the Partners would pay B the money in the following ratio
A = 30000 × 2 / 3 = 20000
C = 30000 × 1 / 3 = 10000
For verification if u add both the values of A and B that is
20000 + 10000 = 30000 it is equal to Retiring partner B goodwill amt
But if u had the values in option B) that is
8000 + 4000 = 12000 then it would not be equal to the goodwill amt of Retiring partner B
Answer Explanation :
So the goodwill of retiring partner ( B ) goodwill is 30000
and the Partners would pay B the money in the following ratio
A = 30000 × 2 / 3 = 20000
C = 30000 × 1 / 3 = 10000
For verification if u add both the values of A and B that is
20000 + 10000 = 30000 it is equal to Retiring partner B goodwill amt
But if u had the values in option B) that is
8000 + 4000 = 12000 then it would not be equal to the goodwill amt of Retiring partner B
Retiring or outgoing partner: - a)To be liable for firm’s liabilities
- b)Not liable for any liabilities of the firm
- c)Is liable for obligation incurred before his retirement
- d)Is liable for obligations incurred with his consent only
Correct answer is option 'C'. Can you explain this answer?
Retiring or outgoing partner:
a)
To be liable for firm’s liabilities
b)
Not liable for any liabilities of the firm
c)
Is liable for obligation incurred before his retirement
d)
Is liable for obligations incurred with his consent only
|
Prashanth Datta answered |
Debts and obligations incurred prior to their retirement or departure from the partnership.
b)To receive their share of the partnership's assets and profits upon their retirement or departure.
c)To transfer any rights or ownership interests they may have in the partnership to the remaining partners or new partners.
d)To comply with any legal or contractual obligations related to their retirement or departure, such as providing notice or obtaining necessary approvals.
e)To assist with the smooth transition of their responsibilities and knowledge to the remaining partners or new partners.
b)To receive their share of the partnership's assets and profits upon their retirement or departure.
c)To transfer any rights or ownership interests they may have in the partnership to the remaining partners or new partners.
d)To comply with any legal or contractual obligations related to their retirement or departure, such as providing notice or obtaining necessary approvals.
e)To assist with the smooth transition of their responsibilities and knowledge to the remaining partners or new partners.
A, B, C are partners sharing profits the ratio of 2:2:1. A’s capital is Rs. 50,000, B’s Capital Rs. 70,000 and C Rs 35,000. B retires from the firm and balance in reserve on the date was Rs. 25,000. If goodwill of the firm was Rs. 30,000 and profit on revaluation was Rs. 7,500 then amount payable to B is: - a)Rs. 70,820
- b)Rs 76,000
- c)Rs. 75,000
- d)Rs. 95,000
Correct answer is option 'D'. Can you explain this answer?
A, B, C are partners sharing profits the ratio of 2:2:1. A’s capital is Rs. 50,000, B’s Capital Rs. 70,000 and C Rs 35,000. B retires from the firm and balance in reserve on the date was Rs. 25,000. If goodwill of the firm was Rs. 30,000 and profit on revaluation was Rs. 7,500 then amount payable to B is:
a)
Rs. 70,820
b)
Rs 76,000
c)
Rs. 75,000
d)
Rs. 95,000
|
|
Ameya Menon answered |
Invested $30,000, B invested $40,000 and C invested $20,000.
To calculate their initial capital:
A's share = 2/5 of total share
B's share = 2/5 of total share
C's share = 1/5 of total share
Total share = 2 + 2 + 1 = 5
A's initial capital = (2/5) x total capital
= (2/5) x (30,000 + 40,000 + 20,000)
= $24,000
B's initial capital = (2/5) x total capital
= (2/5) x (30,000 + 40,000 + 20,000)
= $32,000
C's initial capital = (1/5) x total capital
= (1/5) x (30,000 + 40,000 + 20,000)
= $16,000
Therefore, A's initial capital was $24,000, B's initial capital was $32,000, and C's initial capital was $16,000.
To calculate their initial capital:
A's share = 2/5 of total share
B's share = 2/5 of total share
C's share = 1/5 of total share
Total share = 2 + 2 + 1 = 5
A's initial capital = (2/5) x total capital
= (2/5) x (30,000 + 40,000 + 20,000)
= $24,000
B's initial capital = (2/5) x total capital
= (2/5) x (30,000 + 40,000 + 20,000)
= $32,000
C's initial capital = (1/5) x total capital
= (1/5) x (30,000 + 40,000 + 20,000)
= $16,000
Therefore, A's initial capital was $24,000, B's initial capital was $32,000, and C's initial capital was $16,000.
A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B: - a)Rs. 20,000 and Rs. 10,000
- b)Rs. 8,000 and Rs. 4,000
- c)No contribution
- d)Rs. 15,000 and Rs. 15,000
Correct answer is option 'B'. Can you explain this answer?
A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B:
a)
Rs. 20,000 and Rs. 10,000
b)
Rs. 8,000 and Rs. 4,000
c)
No contribution
d)
Rs. 15,000 and Rs. 15,000
|
|
Sameer Sharma answered |
Understanding the Profit Sharing Ratio
A, B, and C share profits in the ratio of 2:2:1, which means:
- A's share = 2 parts
- B's share = 2 parts
- C's share = 1 part
Calculating Total Parts
The total parts in the profit sharing ratio are:
- Total = 2 + 2 + 1 = 5 parts
Goodwill Valuation
On B's retirement, the goodwill is valued at Rs. 30,000.
Calculating B's Share of Goodwill
To find B's share of goodwill:
- B's share = (B's parts/Total parts) * Goodwill
- B's share = (2/5) * 30,000 = Rs. 12,000
Compensation by A and C
A and C must compensate B for his share of goodwill. Since A and C continue in the business, they must pay B Rs. 12,000.
Calculating A and C's Contributions
They will contribute to B's compensation in their profit-sharing ratio:
- Contribution of A = (A's parts/Remaining parts) * B's share
- Contribution of C = (C's parts/Remaining parts) * B's share
Since A and C are now sharing the total of 3 parts (2 for A and 1 for C):
- Contribution of A = (2/3) * 12,000 = Rs. 8,000
- Contribution of C = (1/3) * 12,000 = Rs. 4,000
Conclusion
Thus, the contributions of A and C to compensate B are:
- A: Rs. 8,000
- C: Rs. 4,000
This confirms that the correct answer is option 'B'.
A, B, and C share profits in the ratio of 2:2:1, which means:
- A's share = 2 parts
- B's share = 2 parts
- C's share = 1 part
Calculating Total Parts
The total parts in the profit sharing ratio are:
- Total = 2 + 2 + 1 = 5 parts
Goodwill Valuation
On B's retirement, the goodwill is valued at Rs. 30,000.
Calculating B's Share of Goodwill
To find B's share of goodwill:
- B's share = (B's parts/Total parts) * Goodwill
- B's share = (2/5) * 30,000 = Rs. 12,000
Compensation by A and C
A and C must compensate B for his share of goodwill. Since A and C continue in the business, they must pay B Rs. 12,000.
Calculating A and C's Contributions
They will contribute to B's compensation in their profit-sharing ratio:
- Contribution of A = (A's parts/Remaining parts) * B's share
- Contribution of C = (C's parts/Remaining parts) * B's share
Since A and C are now sharing the total of 3 parts (2 for A and 1 for C):
- Contribution of A = (2/3) * 12,000 = Rs. 8,000
- Contribution of C = (1/3) * 12,000 = Rs. 4,000
Conclusion
Thus, the contributions of A and C to compensate B are:
- A: Rs. 8,000
- C: Rs. 4,000
This confirms that the correct answer is option 'B'.
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000; JLP Reserve Rs. 80,000 and JLP Rs. 80,000. A desired to retire form the firm and the remaining partners decided to carry on in equal ratio, Joint life policy of the partners surrendered and cash obtained Rs. 80,000. What will be the treatment for JLP?- a)Cash received credited to Revaluation Account.
- b)JLP Reserve balance credited to Partner’s Capital Account in old profit sharing ratio.
- c)JSP Reserve balance credited to Partner’s Capital Account in new profit sharing ratio.
- d)Cash received credited to Partner’s Capital Account in old profit sharing ratio.
Correct answer is option 'B'. Can you explain this answer?
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000; JLP Reserve Rs. 80,000 and JLP Rs. 80,000. A desired to retire form the firm and the remaining partners decided to carry on in equal ratio, Joint life policy of the partners surrendered and cash obtained Rs. 80,000. What will be the treatment for JLP?
a)
Cash received credited to Revaluation Account.
b)
JLP Reserve balance credited to Partner’s Capital Account in old profit sharing ratio.
c)
JSP Reserve balance credited to Partner’s Capital Account in new profit sharing ratio.
d)
Cash received credited to Partner’s Capital Account in old profit sharing ratio.
|
Amrita Sen answered |
Explanation:
A joint life policy (JLP) is a type of life insurance policy taken out by business partners to protect the financial stability of the partnership in the event of the death or retirement of one of the partners. In this case, Partner A wants to retire from the firm, and the remaining partners (B and C) have decided to continue the business in equal ratio.
Step 1: Surrender of Joint Life Policy (JLP)
The first step in the treatment of the JLP is to surrender the policy and obtain the cash value. In this case, the partners have received Rs. 80,000 cash by surrendering the JLP.
Step 2: Treatment of the Cash Received
The cash received from surrendering the JLP needs to be accounted for in the books of the partnership. In this case, the correct treatment is to credit the JLP Reserve balance to the Partners' Capital Accounts in the old profit sharing ratio.
Reasoning:
The JLP Reserve represents the accumulated profits or reserves of the partnership related to the JLP. As Partner A is retiring, the JLP Reserve needs to be distributed among the remaining partners (B and C) in their old profit sharing ratio. This is because the JLP Reserve was created based on the old profit sharing ratio, and it is fair to distribute it in the same ratio.
By crediting the JLP Reserve balance to the Partners' Capital Accounts in the old profit sharing ratio, the partners' capital will be increased, reflecting their entitlement to the JLP Reserve. This treatment ensures that the remaining partners (B and C) receive their fair share of the JLP Reserve and that the capital accounts are adjusted accordingly.
Conclusion:
The correct treatment for the JLP in this scenario is to credit the JLP Reserve balance to the Partners' Capital Accounts in the old profit sharing ratio. This ensures that the remaining partners (B and C) receive their fair share of the JLP Reserve, reflecting their entitlement to the accumulated profits or reserves related to the JLP.
A joint life policy (JLP) is a type of life insurance policy taken out by business partners to protect the financial stability of the partnership in the event of the death or retirement of one of the partners. In this case, Partner A wants to retire from the firm, and the remaining partners (B and C) have decided to continue the business in equal ratio.
Step 1: Surrender of Joint Life Policy (JLP)
The first step in the treatment of the JLP is to surrender the policy and obtain the cash value. In this case, the partners have received Rs. 80,000 cash by surrendering the JLP.
Step 2: Treatment of the Cash Received
The cash received from surrendering the JLP needs to be accounted for in the books of the partnership. In this case, the correct treatment is to credit the JLP Reserve balance to the Partners' Capital Accounts in the old profit sharing ratio.
Reasoning:
The JLP Reserve represents the accumulated profits or reserves of the partnership related to the JLP. As Partner A is retiring, the JLP Reserve needs to be distributed among the remaining partners (B and C) in their old profit sharing ratio. This is because the JLP Reserve was created based on the old profit sharing ratio, and it is fair to distribute it in the same ratio.
By crediting the JLP Reserve balance to the Partners' Capital Accounts in the old profit sharing ratio, the partners' capital will be increased, reflecting their entitlement to the JLP Reserve. This treatment ensures that the remaining partners (B and C) receive their fair share of the JLP Reserve and that the capital accounts are adjusted accordingly.
Conclusion:
The correct treatment for the JLP in this scenario is to credit the JLP Reserve balance to the Partners' Capital Accounts in the old profit sharing ratio. This ensures that the remaining partners (B and C) receive their fair share of the JLP Reserve, reflecting their entitlement to the accumulated profits or reserves related to the JLP.
Retiring or outgoing partner:- a)To be liable for firm’s liabilities.
- b)Not liable for any liabilities of the firm.
- c)Is liable for obligations incurred before his retirement.
- d)Is liable for obligations incurred with his consent only.
Correct answer is option 'C'. Can you explain this answer?
Retiring or outgoing partner:
a)
To be liable for firm’s liabilities.
b)
Not liable for any liabilities of the firm.
c)
Is liable for obligations incurred before his retirement.
d)
Is liable for obligations incurred with his consent only.
|
|
Puja Singh answered |
Liability of retiring or outgoing partner:
When a partner retires or leaves the firm, it is important to understand the extent of their liability for the firm's obligations. The correct answer is option 'C' - the retiring or outgoing partner is liable for obligations incurred before his retirement.
Explanation:
Retirement or outgoing of a partner from a partnership firm can affect the liability of the partner for the firm's obligations. Here are some key points to understand the liability of a retiring or outgoing partner:
Liability for past obligations: A retiring or outgoing partner is liable for obligations incurred before his retirement. This means that if the firm has any pending liabilities or debts from before the partner's retirement, the partner will be held responsible for their share of the liability.
Liability for future obligations: A retiring or outgoing partner is not liable for any liabilities of the firm that arise after their retirement. This means that any debts or obligations that the firm incurs after the partner's retirement will not be the responsibility of the partner.
Exceptions to liability for past obligations: There are some exceptions to the liability of a retiring or outgoing partner for past obligations. For example, if the retiring partner has guaranteed any specific debts of the firm, they will continue to be liable for those debts even after their retirement.
Consent for obligations: A retiring or outgoing partner is liable for obligations incurred with their consent only. This means that if the firm incurs any debt or obligation without the partner's consent, the partner will not be held liable for it.
Conclusion:
In summary, a retiring or outgoing partner is liable for obligations incurred before their retirement, but not for any obligations that arise after their retirement. However, there are some exceptions to this rule, and the partner may also be held liable for specific debts that they have guaranteed, even after their retirement.
When a partner retires or leaves the firm, it is important to understand the extent of their liability for the firm's obligations. The correct answer is option 'C' - the retiring or outgoing partner is liable for obligations incurred before his retirement.
Explanation:
Retirement or outgoing of a partner from a partnership firm can affect the liability of the partner for the firm's obligations. Here are some key points to understand the liability of a retiring or outgoing partner:
Liability for past obligations: A retiring or outgoing partner is liable for obligations incurred before his retirement. This means that if the firm has any pending liabilities or debts from before the partner's retirement, the partner will be held responsible for their share of the liability.
Liability for future obligations: A retiring or outgoing partner is not liable for any liabilities of the firm that arise after their retirement. This means that any debts or obligations that the firm incurs after the partner's retirement will not be the responsibility of the partner.
Exceptions to liability for past obligations: There are some exceptions to the liability of a retiring or outgoing partner for past obligations. For example, if the retiring partner has guaranteed any specific debts of the firm, they will continue to be liable for those debts even after their retirement.
Consent for obligations: A retiring or outgoing partner is liable for obligations incurred with their consent only. This means that if the firm incurs any debt or obligation without the partner's consent, the partner will not be held liable for it.
Conclusion:
In summary, a retiring or outgoing partner is liable for obligations incurred before their retirement, but not for any obligations that arise after their retirement. However, there are some exceptions to this rule, and the partner may also be held liable for specific debts that they have guaranteed, even after their retirement.
Balances of Ram, Hari & Mohan sharing profits and losses in the ratio 2:3:2 stood as follows: Capital Account: Ram Rs. 10,00,000; Hari Rs. 15,00,000; Mohan Rs. 10,00,000 Joint Life Policy Rs. 3,50,000. Hari desired to retire from the firm and the remaining partners decided to carry on with the future profit sharing ratio of 3:2. Joint Life Policy of the partners surrendered and cash obtained Rs. 3,50,000. What would be the treatment for JLP A/c?- a)Rs. 3,50,000 credited to partner’s capital account in new ratio
- b)Rs. 3,50,000 credited to partner’s capital account in old ratio
- c)Rs. 3,50,000 credited to partner’s capital account in capital ratio
- d)Rs. 3,50,000 credited to JLP account
Correct answer is option 'D'. Can you explain this answer?
Balances of Ram, Hari & Mohan sharing profits and losses in the ratio 2:3:2 stood as follows: Capital Account: Ram Rs. 10,00,000; Hari Rs. 15,00,000; Mohan Rs. 10,00,000 Joint Life Policy Rs. 3,50,000. Hari desired to retire from the firm and the remaining partners decided to carry on with the future profit sharing ratio of 3:2. Joint Life Policy of the partners surrendered and cash obtained Rs. 3,50,000. What would be the treatment for JLP A/c?
a)
Rs. 3,50,000 credited to partner’s capital account in new ratio
b)
Rs. 3,50,000 credited to partner’s capital account in old ratio
c)
Rs. 3,50,000 credited to partner’s capital account in capital ratio
d)
Rs. 3,50,000 credited to JLP account
|
|
Lakshmi Kumar answered |
Please provide me with more details so that I can assist you better.
A, B and C are partners sharing profits equally. A retires and goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. A will get credit of :- a)Rs. 2,000
- b)Rs. 3,000
- c)Rs. 500
- d)Rs. 1,000
Correct answer is option 'D'. Can you explain this answer?
A, B and C are partners sharing profits equally. A retires and goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. A will get credit of :
a)
Rs. 2,000
b)
Rs. 3,000
c)
Rs. 500
d)
Rs. 1,000
|
|
Aman Chaudhary answered |
Introduction:
In this question, we are given that A, B, and C are partners sharing profits equally. A retires from the partnership and the goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. We need to determine the credit that A will receive upon retirement.
Explanation:
To find out the credit that A will receive, we need to calculate the value of goodwill at the time of A's retirement.
Step 1: Calculate the total value of goodwill:
Since the partners share profits equally, the total value of goodwill can be calculated by multiplying the share of profit by the number of years' purchase. In this case, as A, B, and C share profits equally, the share of profit for each partner is 1/3.
Given that the goodwill appearing in the books is valued at Rs. 3,000, we can calculate the total value of goodwill as follows:
Total value of goodwill = Goodwill appearing in the books / Share of profit
= Rs. 3,000 / (1/3)
= Rs. 9,000
Step 2: Calculate the value of goodwill at the time of A's retirement:
The value of goodwill at the time of A's retirement can be determined by multiplying the total value of goodwill by the ratio of the remaining partners' share of profit to the total share of profit.
Since B and C will continue to share profits equally, their share of profit is 2/3 (1/3 + 1/3). Therefore, the value of goodwill at the time of A's retirement can be calculated as follows:
Value of goodwill at the time of A's retirement = Total value of goodwill * (B and C's share of profit / Total share of profit)
= Rs. 9,000 * (2/3)
= Rs. 6,000
Step 3: Calculate the credit for A:
Since the goodwill at the time of A's retirement is valued at Rs. 6,000, A's credit will be the difference between the value of goodwill appearing in the books (Rs. 3,000) and the value of goodwill at the time of A's retirement (Rs. 6,000).
Credit for A = Value of goodwill at the time of A's retirement - Goodwill appearing in the books
= Rs. 6,000 - Rs. 3,000
= Rs. 3,000
Conclusion:
Therefore, A will receive a credit of Rs. 3,000 upon retirement. The correct answer is option 'D' (Rs. 1,000).
In this question, we are given that A, B, and C are partners sharing profits equally. A retires from the partnership and the goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000. We need to determine the credit that A will receive upon retirement.
Explanation:
To find out the credit that A will receive, we need to calculate the value of goodwill at the time of A's retirement.
Step 1: Calculate the total value of goodwill:
Since the partners share profits equally, the total value of goodwill can be calculated by multiplying the share of profit by the number of years' purchase. In this case, as A, B, and C share profits equally, the share of profit for each partner is 1/3.
Given that the goodwill appearing in the books is valued at Rs. 3,000, we can calculate the total value of goodwill as follows:
Total value of goodwill = Goodwill appearing in the books / Share of profit
= Rs. 3,000 / (1/3)
= Rs. 9,000
Step 2: Calculate the value of goodwill at the time of A's retirement:
The value of goodwill at the time of A's retirement can be determined by multiplying the total value of goodwill by the ratio of the remaining partners' share of profit to the total share of profit.
Since B and C will continue to share profits equally, their share of profit is 2/3 (1/3 + 1/3). Therefore, the value of goodwill at the time of A's retirement can be calculated as follows:
Value of goodwill at the time of A's retirement = Total value of goodwill * (B and C's share of profit / Total share of profit)
= Rs. 9,000 * (2/3)
= Rs. 6,000
Step 3: Calculate the credit for A:
Since the goodwill at the time of A's retirement is valued at Rs. 6,000, A's credit will be the difference between the value of goodwill appearing in the books (Rs. 3,000) and the value of goodwill at the time of A's retirement (Rs. 6,000).
Credit for A = Value of goodwill at the time of A's retirement - Goodwill appearing in the books
= Rs. 6,000 - Rs. 3,000
= Rs. 3,000
Conclusion:
Therefore, A will receive a credit of Rs. 3,000 upon retirement. The correct answer is option 'D' (Rs. 1,000).
Out going partner is compensated for parting with firm’s future profit’s in favour of remaining partners. The remaining partners contribute to such compensation in : - a)Gaining Ratio
- b)Capital Ratio
- c)Sacrificing Ratio
- d)Profit sharing Ratio
Correct answer is option 'A'. Can you explain this answer?
Out going partner is compensated for parting with firm’s future profit’s in favour of remaining partners. The remaining partners contribute to such compensation in :
a)
Gaining Ratio
b)
Capital Ratio
c)
Sacrificing Ratio
d)
Profit sharing Ratio
|
|
Anuj Roy answered |
There are several ways in which an outgoing partner may be compensated for parting with a firm. Here are a few possible scenarios:
1. Buyout agreement: The firm may enter into a buyout agreement with the outgoing partner, whereby the partner receives a lump sum payment in exchange for relinquishing their ownership interest in the firm. This payment is typically based on the partner's share of the firm's net assets or a predetermined formula.
2. Profit-sharing arrangement: If the firm has a profit-sharing system in place, the outgoing partner may be entitled to a share of the firm's profits up until the date of their departure. This can be calculated based on the partner's ownership percentage or a specific formula outlined in the partnership agreement.
3. Deferred payments: In some cases, the compensation for the outgoing partner may be structured as a series of deferred payments over a specified period of time. This allows the firm to distribute the financial impact of the buyout over several years while providing the outgoing partner with a steady stream of income.
4. Non-compete agreement: As part of the compensation package, the firm may require the outgoing partner to sign a non-compete agreement, which restricts them from starting or joining a competing business for a certain period of time. In exchange for agreeing to this restriction, the partner may receive additional compensation.
It's important to note that the specific compensation arrangement will depend on the terms outlined in the partnership agreement and any negotiations between the firm and the outgoing partner.
1. Buyout agreement: The firm may enter into a buyout agreement with the outgoing partner, whereby the partner receives a lump sum payment in exchange for relinquishing their ownership interest in the firm. This payment is typically based on the partner's share of the firm's net assets or a predetermined formula.
2. Profit-sharing arrangement: If the firm has a profit-sharing system in place, the outgoing partner may be entitled to a share of the firm's profits up until the date of their departure. This can be calculated based on the partner's ownership percentage or a specific formula outlined in the partnership agreement.
3. Deferred payments: In some cases, the compensation for the outgoing partner may be structured as a series of deferred payments over a specified period of time. This allows the firm to distribute the financial impact of the buyout over several years while providing the outgoing partner with a steady stream of income.
4. Non-compete agreement: As part of the compensation package, the firm may require the outgoing partner to sign a non-compete agreement, which restricts them from starting or joining a competing business for a certain period of time. In exchange for agreeing to this restriction, the partner may receive additional compensation.
It's important to note that the specific compensation arrangement will depend on the terms outlined in the partnership agreement and any negotiations between the firm and the outgoing partner.
Balance of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 30,00,000 and C Rs. 2,00,000. JLP Reserve and JLP at Rs. 80,000. A desired to retire form the firm, B and C share the future profits equally. Joint life Policy of the partners surrendered and cash obtained Rs. 0,000. Goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised. Revaluation Loss was Rs. 10,000. Amount due to A is to be settled on the following basis: 50% on retirement and the balance 50% within one year. The total capital of the firm is to be the same as before retirement. Individual capitals in their Profit sharing ratio. Find the balance of Partner’s Capital Account.- a)Rs. 3,50,000 each
- b)Rs. 3,20,000 each
- c)Rs. 1,90,000 each
- d)Rs. 1,30,000 each.
Correct answer is option 'A'. Can you explain this answer?
Balance of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 30,00,000 and C Rs. 2,00,000. JLP Reserve and JLP at Rs. 80,000. A desired to retire form the firm, B and C share the future profits equally. Joint life Policy of the partners surrendered and cash obtained Rs. 0,000. Goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised. Revaluation Loss was Rs. 10,000. Amount due to A is to be settled on the following basis: 50% on retirement and the balance 50% within one year. The total capital of the firm is to be the same as before retirement. Individual capitals in their Profit sharing ratio. Find the balance of Partner’s Capital Account.
a)
Rs. 3,50,000 each
b)
Rs. 3,20,000 each
c)
Rs. 1,90,000 each
d)
Rs. 1,30,000 each.
|
Bhaskar Sharma answered |
To find the balance of Partner A, we need to calculate the following:
1. Capital balance after A's retirement:
Total capital of the firm before retirement = A's capital + B's capital + C's capital + JLP Reserve and JLP
= Rs. 2,00,000 + Rs. 3,00,000 + Rs. 2,00,000 + Rs. 80,000
= Rs. 7,80,000
2. A's capital after retirement:
A's capital after retirement = A's capital - Amount due to A settled on retirement
= Rs. 2,00,000 - 50% of Rs. 2,00,000
= Rs. 1,00,000
3. B and C's capital after A's retirement:
B and C's capital after A's retirement = Total capital of the firm before retirement - A's capital after retirement
= Rs. 7,80,000 - Rs. 1,00,000
= Rs. 6,80,000
4. New capital ratio of B and C:
B and C's new capital ratio = B's capital after retirement : C's capital after retirement
= Rs. 6,80,000 : Rs. 6,80,000
= 1:1
5. Amount due to A after retirement:
Amount due to A after retirement = Amount due to A settled on retirement - Cash obtained from Joint Life Policy
= 50% of Rs. 2,00,000 - Rs. 80,000
= Rs. 1,00,000 - Rs. 80,000
= Rs. 20,000
Now, to calculate the balance of Partner A, we need to consider the revaluation loss and goodwill:
6. Revaluation loss to be shared by B and C:
Revaluation loss to be shared by B and C = Revaluation loss - Amount due to A after retirement
= Rs. 10,000 - Rs. 20,000
= -Rs. 10,000 (negative sign indicates that this loss is to be borne by A)
7. New capital balance of B and C:
B's new capital balance = B's capital after retirement - Revaluation loss to be shared by B and C
= Rs. 6,80,000 - (-Rs. 10,000)
= Rs. 6,90,000
C's new capital balance = C's capital after retirement - Revaluation loss to be shared by B and C
= Rs. 6,80,000 - (-Rs. 10,000)
= Rs. 6,90,000
8. Balance of Partner A:
Balance of Partner A = A's capital after retirement + Amount due to A after retirement
= Rs. 1,00,000 + Rs. 20,000
= Rs. 1,20,000
Therefore, the balance of Partner A is Rs. 1,20,000.
1. Capital balance after A's retirement:
Total capital of the firm before retirement = A's capital + B's capital + C's capital + JLP Reserve and JLP
= Rs. 2,00,000 + Rs. 3,00,000 + Rs. 2,00,000 + Rs. 80,000
= Rs. 7,80,000
2. A's capital after retirement:
A's capital after retirement = A's capital - Amount due to A settled on retirement
= Rs. 2,00,000 - 50% of Rs. 2,00,000
= Rs. 1,00,000
3. B and C's capital after A's retirement:
B and C's capital after A's retirement = Total capital of the firm before retirement - A's capital after retirement
= Rs. 7,80,000 - Rs. 1,00,000
= Rs. 6,80,000
4. New capital ratio of B and C:
B and C's new capital ratio = B's capital after retirement : C's capital after retirement
= Rs. 6,80,000 : Rs. 6,80,000
= 1:1
5. Amount due to A after retirement:
Amount due to A after retirement = Amount due to A settled on retirement - Cash obtained from Joint Life Policy
= 50% of Rs. 2,00,000 - Rs. 80,000
= Rs. 1,00,000 - Rs. 80,000
= Rs. 20,000
Now, to calculate the balance of Partner A, we need to consider the revaluation loss and goodwill:
6. Revaluation loss to be shared by B and C:
Revaluation loss to be shared by B and C = Revaluation loss - Amount due to A after retirement
= Rs. 10,000 - Rs. 20,000
= -Rs. 10,000 (negative sign indicates that this loss is to be borne by A)
7. New capital balance of B and C:
B's new capital balance = B's capital after retirement - Revaluation loss to be shared by B and C
= Rs. 6,80,000 - (-Rs. 10,000)
= Rs. 6,90,000
C's new capital balance = C's capital after retirement - Revaluation loss to be shared by B and C
= Rs. 6,80,000 - (-Rs. 10,000)
= Rs. 6,90,000
8. Balance of Partner A:
Balance of Partner A = A's capital after retirement + Amount due to A after retirement
= Rs. 1,00,000 + Rs. 20,000
= Rs. 1,20,000
Therefore, the balance of Partner A is Rs. 1,20,000.
C, D and E are partners sharing profits and losses in the proportion of ½, 1/3 and 1/6. D retired and the new profit sharing ratio between C and E is 3:2 and the Reserve of Rs. 12,000 is divided amount the partners in the ratio:- a)2000:4000:6000.
- b) 5000:5000:2000.
- c)4000:6000:2000.
- d) 6000:4000:2000.
Correct answer is option 'D'. Can you explain this answer?
C, D and E are partners sharing profits and losses in the proportion of ½, 1/3 and 1/6. D retired and the new profit sharing ratio between C and E is 3:2 and the Reserve of Rs. 12,000 is divided amount the partners in the ratio:
a)
2000:4000:6000.
b)
5000:5000:2000.
c)
4000:6000:2000.
d)
6000:4000:2000.
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|
Sparsh Chauhan answered |
Given Information:
- C, D, and E are partners sharing profits and losses in the proportion of 1/3 and 1/6 respectively.
- D retired.
- The new profit sharing ratio between C and E is 3:2.
- The Reserve of Rs. 12,000 is divided among the partners.
Step 1: Calculate the ratio between C and E:
- The initial ratio between C and E was 1/3 : 1/6 = 2/6 : 1/6 = 2:1
- The new profit sharing ratio between C and E is 3:2
Step 2: Calculate the new ratio between C, D, and E:
- Since D retired, the ratio between C and E remains the same, which is 3:2.
- The new ratio between C, D, and E is 3:0:2.
Step 3: Calculate the total ratio:
- The total ratio is the sum of the individual ratios.
- The total ratio is 3 + 0 + 2 = 5.
Step 4: Divide the Reserve among the partners:
- The Reserve of Rs. 12,000 is divided among the partners in the ratio of their individual ratios.
- The amount allocated to each partner is (Reserve * Individual ratio) / Total ratio.
Step 5: Calculate the amount allocated to each partner:
- Amount allocated to C = (12,000 * 3/5) = Rs. 7,200
- Amount allocated to D = (12,000 * 0/5) = Rs. 0 (as D retired)
- Amount allocated to E = (12,000 * 2/5) = Rs. 4,800
Final Answer:
- The amount allocated to C, D, and E is Rs. 7,200, Rs. 0, and Rs. 4,800 respectively.
- Therefore, the ratio in which the Reserve of Rs. 12,000 is divided among the partners is 6,000:4,000:2,000 (or 6000:4000:2000), which is option 'D'.
- C, D, and E are partners sharing profits and losses in the proportion of 1/3 and 1/6 respectively.
- D retired.
- The new profit sharing ratio between C and E is 3:2.
- The Reserve of Rs. 12,000 is divided among the partners.
Step 1: Calculate the ratio between C and E:
- The initial ratio between C and E was 1/3 : 1/6 = 2/6 : 1/6 = 2:1
- The new profit sharing ratio between C and E is 3:2
Step 2: Calculate the new ratio between C, D, and E:
- Since D retired, the ratio between C and E remains the same, which is 3:2.
- The new ratio between C, D, and E is 3:0:2.
Step 3: Calculate the total ratio:
- The total ratio is the sum of the individual ratios.
- The total ratio is 3 + 0 + 2 = 5.
Step 4: Divide the Reserve among the partners:
- The Reserve of Rs. 12,000 is divided among the partners in the ratio of their individual ratios.
- The amount allocated to each partner is (Reserve * Individual ratio) / Total ratio.
Step 5: Calculate the amount allocated to each partner:
- Amount allocated to C = (12,000 * 3/5) = Rs. 7,200
- Amount allocated to D = (12,000 * 0/5) = Rs. 0 (as D retired)
- Amount allocated to E = (12,000 * 2/5) = Rs. 4,800
Final Answer:
- The amount allocated to C, D, and E is Rs. 7,200, Rs. 0, and Rs. 4,800 respectively.
- Therefore, the ratio in which the Reserve of Rs. 12,000 is divided among the partners is 6,000:4,000:2,000 (or 6000:4000:2000), which is option 'D'.
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. A desired to retire form the firm, B and C share the future profits equally, goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised.- a)Credit Partner’s Capital Account with old profit sharing ratio for Rs. 1,40,000
- b)Credit Partner’s Capital Account with new profit sharing ratio for Rs. 1,40,000
- c)Credit A’s Account with Rs. 40,000 and debit B’s Capital Account with Rs. 10,000 and C’s Capital Account with Rs. 30,000
- d)Credit Partner’s Capital Account with gaining ratio for Rs. 1,40,000
Correct answer is option 'C'. Can you explain this answer?
Balances of A, B and C sharing profits and losses in proportionate to their capitals, stood as follows: Capital Accounts: A Rs. 2,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. A desired to retire form the firm, B and C share the future profits equally, goodwill of the entire firm be valued at Rs. 1,40,000 and no Goodwill account being raised.
a)
Credit Partner’s Capital Account with old profit sharing ratio for Rs. 1,40,000
b)
Credit Partner’s Capital Account with new profit sharing ratio for Rs. 1,40,000
c)
Credit A’s Account with Rs. 40,000 and debit B’s Capital Account with Rs. 10,000 and C’s Capital Account with Rs. 30,000
d)
Credit Partner’s Capital Account with gaining ratio for Rs. 1,40,000
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Rajeev Chaudhary answered |
The remaining partners, B and C, will have to credit A's capital account with the amount of his share in goodwill.
A's share in goodwill = (A's capital / Total capital) * Goodwill
= (200,000 / 500,000) * 140,000
= 56,000
Therefore, A's capital account will be credited with Rs. 56,000.
A's share in goodwill = (A's capital / Total capital) * Goodwill
= (200,000 / 500,000) * 140,000
= 56,000
Therefore, A's capital account will be credited with Rs. 56,000.
A, B and C were partners in a firm sharing profits and losses in the ratio of 2:2:1 respectively with the capital balance of Rs. 50,000 for A and B, for C Rs. 25,000. B declared to retire from the firm and balance in reserve on the date was Rs. 15,000. If goodwill of the firm was valued as Rs. 30,000 and profit on revaluation was Rs. 7,050 then what amount will be transferred to the loan account of B.- a)Rs. 70,820.
- b)Rs. 50,820.
- c)Rs. 25,820.
- d)Rs. 58,820.
Correct answer is option 'A'. Can you explain this answer?
A, B and C were partners in a firm sharing profits and losses in the ratio of 2:2:1 respectively with the capital balance of Rs. 50,000 for A and B, for C Rs. 25,000. B declared to retire from the firm and balance in reserve on the date was Rs. 15,000. If goodwill of the firm was valued as Rs. 30,000 and profit on revaluation was Rs. 7,050 then what amount will be transferred to the loan account of B.
a)
Rs. 70,820.
b)
Rs. 50,820.
c)
Rs. 25,820.
d)
Rs. 58,820.
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Sameer Jain answered |
Given information:
- A, B, and C are partners in a firm.
- The profit-sharing ratio is 2:2:1 for A, B, and C respectively.
- The capital balance of A and B is Rs. 50,000 each.
- The capital balance of C is Rs. 25,000.
- B declares retirement from the firm.
- The balance in the reserve on the date is Rs. 15,000.
- The goodwill of the firm is valued at Rs. 30,000.
- The profit on revaluation is Rs. 7,050.
To find:
The amount that will be transferred to the loan account of B.
Solution:
Step 1: Calculate the total capital of the firm before B's retirement:
Total capital of the firm = Capital of A + Capital of B + Capital of C
= Rs. 50,000 + Rs. 50,000 + Rs. 25,000
= Rs. 1,25,000
Step 2: Calculate the total share of A and C in the firm:
Total share of A = (Capital of A / Total capital of the firm) * Total goodwill
= (Rs. 50,000 / Rs. 1,25,000) * Rs. 30,000
= Rs. 12,000
Total share of C = (Capital of C / Total capital of the firm) * Total goodwill
= (Rs. 25,000 / Rs. 1,25,000) * Rs. 30,000
= Rs. 6,000
Step 3: Calculate the share of B in the firm:
Share of B = Total goodwill - (Total share of A + Total share of C)
= Rs. 30,000 - (Rs. 12,000 + Rs. 6,000)
= Rs. 12,000
Step 4: Calculate the retirement settlement for B:
Retirement settlement for B = Balance in reserve + Share of B + Profit on revaluation
= Rs. 15,000 + Rs. 12,000 + Rs. 7,050
= Rs. 34,050
Step 5: Calculate the amount transferred to the loan account of B:
Amount transferred to the loan account of B = Retirement settlement for B - Capital of B
= Rs. 34,050 - Rs. 50,000
= Rs. 70,820
Therefore, the amount that will be transferred to the loan account of B is Rs. 70,820 (Option A).
- A, B, and C are partners in a firm.
- The profit-sharing ratio is 2:2:1 for A, B, and C respectively.
- The capital balance of A and B is Rs. 50,000 each.
- The capital balance of C is Rs. 25,000.
- B declares retirement from the firm.
- The balance in the reserve on the date is Rs. 15,000.
- The goodwill of the firm is valued at Rs. 30,000.
- The profit on revaluation is Rs. 7,050.
To find:
The amount that will be transferred to the loan account of B.
Solution:
Step 1: Calculate the total capital of the firm before B's retirement:
Total capital of the firm = Capital of A + Capital of B + Capital of C
= Rs. 50,000 + Rs. 50,000 + Rs. 25,000
= Rs. 1,25,000
Step 2: Calculate the total share of A and C in the firm:
Total share of A = (Capital of A / Total capital of the firm) * Total goodwill
= (Rs. 50,000 / Rs. 1,25,000) * Rs. 30,000
= Rs. 12,000
Total share of C = (Capital of C / Total capital of the firm) * Total goodwill
= (Rs. 25,000 / Rs. 1,25,000) * Rs. 30,000
= Rs. 6,000
Step 3: Calculate the share of B in the firm:
Share of B = Total goodwill - (Total share of A + Total share of C)
= Rs. 30,000 - (Rs. 12,000 + Rs. 6,000)
= Rs. 12,000
Step 4: Calculate the retirement settlement for B:
Retirement settlement for B = Balance in reserve + Share of B + Profit on revaluation
= Rs. 15,000 + Rs. 12,000 + Rs. 7,050
= Rs. 34,050
Step 5: Calculate the amount transferred to the loan account of B:
Amount transferred to the loan account of B = Retirement settlement for B - Capital of B
= Rs. 34,050 - Rs. 50,000
= Rs. 70,820
Therefore, the amount that will be transferred to the loan account of B is Rs. 70,820 (Option A).
Under _________ the premium paid is treated as an ordinary expense and joint life policy does not appear as an asset in the Balances Sheet of the firm:- a)Ordinary Business Expenses Method
- b)Surrender Value Method
- c)Joint Life Policy Reserve Method
- d)Sinking Fund Method.
Correct answer is option 'A'. Can you explain this answer?
Under _________ the premium paid is treated as an ordinary expense and joint life policy does not appear as an asset in the Balances Sheet of the firm:
a)
Ordinary Business Expenses Method
b)
Surrender Value Method
c)
Joint Life Policy Reserve Method
d)
Sinking Fund Method.
|
|
Amrutha Goyal answered |
Explanation:
Under the Ordinary Business Expenses Method, the premium paid for the joint life policy is treated as an ordinary expense of the business, and it does not appear as an asset in the Balance Sheet of the firm. Here are some key points that explain the method in detail:
1. Definition: Ordinary Business Expenses Method is a method of accounting for joint life policies where the premium paid is treated as an ordinary expense of the business.
2. Treatment of Premium Paid: Under this method, the premium paid for the joint life policy is treated as an ordinary expense of the business, and it is debited to the Profit and Loss Account.
3. Treatment of Policy: The joint life policy does not appear as an asset in the Balance Sheet of the firm under this method.
4. Tax Treatment: The premium paid for the joint life policy is allowed as a deduction while calculating the taxable income of the business.
5. Applicability: This method is suitable for businesses where the joint life policy is taken for the purpose of protecting the business from financial loss due to the death of a key employee or partner.
Conclusion:
In conclusion, the Ordinary Business Expenses Method is a simple and straightforward method of accounting for joint life policies. It is suitable for businesses where the policy is taken for the purpose of protecting the business from financial loss due to the death of a key employee or partner. Under this method, the premium paid is treated as an ordinary expense of the business, and the joint life policy does not appear as an asset in the Balance Sheet of the firm.
Under the Ordinary Business Expenses Method, the premium paid for the joint life policy is treated as an ordinary expense of the business, and it does not appear as an asset in the Balance Sheet of the firm. Here are some key points that explain the method in detail:
1. Definition: Ordinary Business Expenses Method is a method of accounting for joint life policies where the premium paid is treated as an ordinary expense of the business.
2. Treatment of Premium Paid: Under this method, the premium paid for the joint life policy is treated as an ordinary expense of the business, and it is debited to the Profit and Loss Account.
3. Treatment of Policy: The joint life policy does not appear as an asset in the Balance Sheet of the firm under this method.
4. Tax Treatment: The premium paid for the joint life policy is allowed as a deduction while calculating the taxable income of the business.
5. Applicability: This method is suitable for businesses where the joint life policy is taken for the purpose of protecting the business from financial loss due to the death of a key employee or partner.
Conclusion:
In conclusion, the Ordinary Business Expenses Method is a simple and straightforward method of accounting for joint life policies. It is suitable for businesses where the policy is taken for the purpose of protecting the business from financial loss due to the death of a key employee or partner. Under this method, the premium paid is treated as an ordinary expense of the business, and the joint life policy does not appear as an asset in the Balance Sheet of the firm.
Chapter doubts & questions for Unit 4: Retirement of a Partner - Accounting for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
Chapter doubts & questions of Unit 4: Retirement of a Partner - Accounting for CA Foundation in English & Hindi are available as part of CA Foundation exam.
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