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All questions of Unit 5: Death of a Partner for CA Foundation Exam
A, B and C are partners sharing profits and losses in the ratio 2:2:1. C dies on 31st March 2007. The profits of the financial year ending 31st March 2007 is Rs. 64,000. The share of the deceased partner in the profits will be: - a)Rs. 9,200
- b)Rs. 12,800
- c)Rs. 3,100
- d)Rs. 6,100
Correct answer is option 'B'. Can you explain this answer?
A, B and C are partners sharing profits and losses in the ratio 2:2:1. C dies on 31st March 2007. The profits of the financial year ending 31st March 2007 is Rs. 64,000. The share of the deceased partner in the profits will be:
a)
Rs. 9,200
b)
Rs. 12,800
c)
Rs. 3,100
d)
Rs. 6,100
|
Srestha Shah answered |
Given data:
- A, B and C are partners sharing profits and losses in the ratio 2:2:1.
- C dies on 31st March 2007.
- The profits of the financial year ending 31st March 2007 is Rs. 64,000.
To find: The share of the deceased partner in the profits.
Solution:
Step 1: Calculate the total profit for the year
Total profit = Rs. 64,000
Step 2: Calculate the share of A and B in the profit
Ratio of A and B's share = 2:2 = 4
Total share of A and B = 4+1 = 5
Share of A = (4/5) * Total profit = (4/5) * Rs. 64,000 = Rs. 51,200
Share of B = (4/5) * Total profit = (4/5) * Rs. 64,000 = Rs. 51,200
Step 3: Calculate the share of C in the profit till his death
As C died on 31st March 2007, his share in the profit will be from 1st April 2006 to 31st March 2007.
Let's assume the year's profit is divided equally into 12 months.
So, C's share in the profit for the year = (1/12) * (1/5) * Total profit = (1/60) * Rs. 64,000 = Rs. 1,066.67
Step 4: Calculate the share of C's legal heir in the profit
As C died, his legal heir will get his share in the profit. As per the Indian Partnership Act, 1932, the legal heir of a deceased partner is entitled to the deceased partner's share in the profits from the date of the last agreed balance sheet till the date of the deceased partner's death.
Here, we are not given the date of the last agreed balance sheet. So, we assume that it is 31st March 2006, i.e. one year before the death of C.
So, C's legal heir's share in the profit = (1/12) * (1/5) * Total profit = (1/60) * Rs. 64,000 = Rs. 1,066.67
Step 5: Calculate the total share of C's legal heir in the profit
Total share of C's legal heir = (C's share till death) + (C's legal heir's share) = Rs. 1,066.67 + Rs. 1,066.67 = Rs. 2,133.34
Therefore, the share of the deceased partner in the profits is Rs. 2,133.34, which is option (B).
- A, B and C are partners sharing profits and losses in the ratio 2:2:1.
- C dies on 31st March 2007.
- The profits of the financial year ending 31st March 2007 is Rs. 64,000.
To find: The share of the deceased partner in the profits.
Solution:
Step 1: Calculate the total profit for the year
Total profit = Rs. 64,000
Step 2: Calculate the share of A and B in the profit
Ratio of A and B's share = 2:2 = 4
Total share of A and B = 4+1 = 5
Share of A = (4/5) * Total profit = (4/5) * Rs. 64,000 = Rs. 51,200
Share of B = (4/5) * Total profit = (4/5) * Rs. 64,000 = Rs. 51,200
Step 3: Calculate the share of C in the profit till his death
As C died on 31st March 2007, his share in the profit will be from 1st April 2006 to 31st March 2007.
Let's assume the year's profit is divided equally into 12 months.
So, C's share in the profit for the year = (1/12) * (1/5) * Total profit = (1/60) * Rs. 64,000 = Rs. 1,066.67
Step 4: Calculate the share of C's legal heir in the profit
As C died, his legal heir will get his share in the profit. As per the Indian Partnership Act, 1932, the legal heir of a deceased partner is entitled to the deceased partner's share in the profits from the date of the last agreed balance sheet till the date of the deceased partner's death.
Here, we are not given the date of the last agreed balance sheet. So, we assume that it is 31st March 2006, i.e. one year before the death of C.
So, C's legal heir's share in the profit = (1/12) * (1/5) * Total profit = (1/60) * Rs. 64,000 = Rs. 1,066.67
Step 5: Calculate the total share of C's legal heir in the profit
Total share of C's legal heir = (C's share till death) + (C's legal heir's share) = Rs. 1,066.67 + Rs. 1,066.67 = Rs. 2,133.34
Therefore, the share of the deceased partner in the profits is Rs. 2,133.34, which is option (B).
In the absence of proper agreement, representative of the diseased partner is entitled to the Dead partner’s share in the following items.- a)Profits till date, goodwill, joint life policy, share in revalued assets and liabilities.
- b)Capital, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities
- c)Capital, profits till date, goodwill, interest on capital, share in revalued assets and liabilities
- d)Capital, profits till date, goodwill, joint life policy, share in revalued assets and liabilities
Correct answer is option 'D'. Can you explain this answer?
In the absence of proper agreement, representative of the diseased partner is entitled to the Dead partner’s share in the following items.
a)
Profits till date, goodwill, joint life policy, share in revalued assets and liabilities.
b)
Capital, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities
c)
Capital, profits till date, goodwill, interest on capital, share in revalued assets and liabilities
d)
Capital, profits till date, goodwill, joint life policy, share in revalued assets and liabilities
|
Asmit Sharma answered |
Isme smjhna kya hai ???
B, C, D are partners sharing profits in the ratio 7:5:4. D died on 30th June 2006 and profits for the year 2005-2006 were Rs. 12,000. How much share in profits for the period 1st April 2006 to 30th June 2006 will be credited to D’s Account?- a)Rs. 3,000
- b)Rs. 750
- c)Nil
- d)Rs. 1,000
Correct answer is option 'B'. Can you explain this answer?
B, C, D are partners sharing profits in the ratio 7:5:4. D died on 30th June 2006 and profits for the year 2005-2006 were Rs. 12,000. How much share in profits for the period 1st April 2006 to 30th June 2006 will be credited to D’s Account?
a)
Rs. 3,000
b)
Rs. 750
c)
Nil
d)
Rs. 1,000
|
Akshay Das answered |
Since D died on 30th June 2006, his share in profits will be calculated for the period from 1st April 2006 to 30th June 2006.
First, we need to calculate the total profits for the year 2005-2006. Let's assume that the profits for the year were divided equally among the partners for simplicity. Then, each partner's share of the profits would be:
B's share = (7/16) x Rs. 12,000 = Rs. 5,250
C's share = (5/16) x Rs. 12,000 = Rs. 3,750
D's share = (4/16) x Rs. 12,000 = Rs. 3,000
Now, we need to calculate the profits for the period from 1st April 2006 to 30th June 2006. Let's assume that the profits for this period were also divided equally among the partners. Then, each partner's share of the profits would be:
B's share = (7/12) x (1/4) x profits for the year = (7/12) x (1/4) x Rs. 12,000 = Rs. 1,225
C's share = (5/12) x (1/4) x profits for the year = (5/12) x (1/4) x Rs. 12,000 = Rs. 875
D's share = (4/12) x (1/4) x profits for the year = (1/3) x Rs. 3,000 = Rs. 1,000
Therefore, D's share in profits for the period 1st April 2006 to 30th June 2006 will be Rs. 1,000.
First, we need to calculate the total profits for the year 2005-2006. Let's assume that the profits for the year were divided equally among the partners for simplicity. Then, each partner's share of the profits would be:
B's share = (7/16) x Rs. 12,000 = Rs. 5,250
C's share = (5/16) x Rs. 12,000 = Rs. 3,750
D's share = (4/16) x Rs. 12,000 = Rs. 3,000
Now, we need to calculate the profits for the period from 1st April 2006 to 30th June 2006. Let's assume that the profits for this period were also divided equally among the partners. Then, each partner's share of the profits would be:
B's share = (7/12) x (1/4) x profits for the year = (7/12) x (1/4) x Rs. 12,000 = Rs. 1,225
C's share = (5/12) x (1/4) x profits for the year = (5/12) x (1/4) x Rs. 12,000 = Rs. 875
D's share = (4/12) x (1/4) x profits for the year = (1/3) x Rs. 3,000 = Rs. 1,000
Therefore, D's share in profits for the period 1st April 2006 to 30th June 2006 will be Rs. 1,000.
A, B and C are the partners sharing profits and losses in the ratio 2:1:1. Firm has a joint life policy of Rs. 1,20,000 and in the balance sheet it is appearing at the surrender value i.e. Rs. 20,000. On the death of A, how this JLP will be shared among the partners.- a)50,000:25,000:25,000.
- b)60,000:30,000:30,000.
- c)40,000:35,000:25,000.
- d)Whole of Rs. 1,20,000 will be paid to A.
Correct answer is option 'A'. Can you explain this answer?
A, B and C are the partners sharing profits and losses in the ratio 2:1:1. Firm has a joint life policy of Rs. 1,20,000 and in the balance sheet it is appearing at the surrender value i.e. Rs. 20,000. On the death of A, how this JLP will be shared among the partners.
a)
50,000:25,000:25,000.
b)
60,000:30,000:30,000.
c)
40,000:35,000:25,000.
d)
Whole of Rs. 1,20,000 will be paid to A.
|
|
Mahesh Chakraborty answered |
Calculation of JLP Share on Death of A
Partnership Ratio: 2:1:1
Total Ratio: 4
JLP amount: Rs. 1,20,000
Surrender Value: Rs. 20,000
Step 1: Calculation of JLP Share
Total JLP Share = JLP amount - Surrender Value
Total JLP Share = Rs. 1,20,000 - Rs. 20,000
Total JLP Share = Rs. 1,00,000
A's share = 2/4 x Total JLP Share
A's share = 1/2 x Rs. 1,00,000
A's share = Rs. 50,000
B's share = 1/4 x Total JLP Share
B's share = 1/4 x Rs. 1,00,000
B's share = Rs. 25,000
C's share = 1/4 x Total JLP Share
C's share = 1/4 x Rs. 1,00,000
C's share = Rs. 25,000
Step 2: Sharing of JLP Share on Death of A
A's share will be given to his legal heirs.
Remaining JLP share will be shared among the partners in their profit sharing ratio.
Share of B and C = Total JLP Share - A's share
Share of B and C = Rs. 1,00,000 - Rs. 50,000
Share of B and C = Rs. 50,000
B's share = B's profit sharing ratio x Share of B and C
B's share = 1/4 x Rs. 50,000
B's share = Rs. 12,500
C's share = C's profit sharing ratio x Share of B and C
C's share = 1/4 x Rs. 50,000
C's share = Rs. 12,500
Therefore, the JLP share on death of A will be shared among the partners as follows:
A's legal heirs: Rs. 50,000
B: Rs. 12,500
C: Rs. 12,500
Partnership Ratio: 2:1:1
Total Ratio: 4
JLP amount: Rs. 1,20,000
Surrender Value: Rs. 20,000
Step 1: Calculation of JLP Share
Total JLP Share = JLP amount - Surrender Value
Total JLP Share = Rs. 1,20,000 - Rs. 20,000
Total JLP Share = Rs. 1,00,000
A's share = 2/4 x Total JLP Share
A's share = 1/2 x Rs. 1,00,000
A's share = Rs. 50,000
B's share = 1/4 x Total JLP Share
B's share = 1/4 x Rs. 1,00,000
B's share = Rs. 25,000
C's share = 1/4 x Total JLP Share
C's share = 1/4 x Rs. 1,00,000
C's share = Rs. 25,000
Step 2: Sharing of JLP Share on Death of A
A's share will be given to his legal heirs.
Remaining JLP share will be shared among the partners in their profit sharing ratio.
Share of B and C = Total JLP Share - A's share
Share of B and C = Rs. 1,00,000 - Rs. 50,000
Share of B and C = Rs. 50,000
B's share = B's profit sharing ratio x Share of B and C
B's share = 1/4 x Rs. 50,000
B's share = Rs. 12,500
C's share = C's profit sharing ratio x Share of B and C
C's share = 1/4 x Rs. 50,000
C's share = Rs. 12,500
Therefore, the JLP share on death of A will be shared among the partners as follows:
A's legal heirs: Rs. 50,000
B: Rs. 12,500
C: Rs. 12,500
In the absence of proper agreement, representative of the deseased partner is entitled to the Dead partner’s share in the following items.- a)Profits till date, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
- b)Capital, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
- c)Capital, profits till date, goodwill, interest on capital, share in revalued assets and liabilities.
- d)Capital, profits till date, goodwill, joint life policy, share in revalued assets and liabilities.
Correct answer is option 'D'. Can you explain this answer?
In the absence of proper agreement, representative of the deseased partner is entitled to the Dead partner’s share in the following items.
a)
Profits till date, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
b)
Capital, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
c)
Capital, profits till date, goodwill, interest on capital, share in revalued assets and liabilities.
d)
Capital, profits till date, goodwill, joint life policy, share in revalued assets and liabilities.
|
Sai Kulkarni answered |
Explanation:
The representative of the deceased partner is entitled to the deceased partner's share in the following items:
A: Profits till date, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
B: Capital, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
C: Capital, profits till date, goodwill, interest on capital, share in revalued assets and liabilities.
D: Capital, profits till date, goodwill, joint life policy, share in revalued assets and liabilities.
The correct answer is D because it includes all the entitlements that the representative of the deceased partner is entitled to.
Here is a breakdown of each option:
A:
- Profits till date: The representative is entitled to receive the deceased partner's share of profits earned until the date of death.
- Goodwill: The representative is entitled to the deceased partner's share of goodwill, which is the value of the firm's reputation and customer base.
- Joint life policy: The representative is entitled to the deceased partner's share of any joint life insurance policy taken by the partnership.
- Interest on capital: The representative is entitled to the deceased partner's share of interest earned on their capital investment in the partnership.
- Share in revalued assets and liabilities: The representative is entitled to the deceased partner's share in any revaluation of the partnership's assets and liabilities.
B:
- Capital: The representative is entitled to the deceased partner's share of the capital invested in the partnership.
- Goodwill: Same as option A.
- Joint life policy: Same as option A.
- Interest on capital: Same as option A.
- Share in revalued assets and liabilities: Same as option A.
C:
- Capital: Same as option B.
- Profits till date: Same as option A.
- Goodwill: Same as option A.
- Interest on capital: Same as option A.
- Share in revalued assets and liabilities: Same as option A.
D:
- Capital: Same as option B.
- Profits till date: Same as option A.
- Goodwill: Same as option A.
- Joint life policy: Same as option A.
- Share in revalued assets and liabilities: Same as option A.
Therefore, option D is the correct answer as it includes all the entitlements that the representative of the deceased partner is entitled to.
The representative of the deceased partner is entitled to the deceased partner's share in the following items:
A: Profits till date, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
B: Capital, goodwill, joint life policy, interest on capital, share in revalued assets and liabilities.
C: Capital, profits till date, goodwill, interest on capital, share in revalued assets and liabilities.
D: Capital, profits till date, goodwill, joint life policy, share in revalued assets and liabilities.
The correct answer is D because it includes all the entitlements that the representative of the deceased partner is entitled to.
Here is a breakdown of each option:
A:
- Profits till date: The representative is entitled to receive the deceased partner's share of profits earned until the date of death.
- Goodwill: The representative is entitled to the deceased partner's share of goodwill, which is the value of the firm's reputation and customer base.
- Joint life policy: The representative is entitled to the deceased partner's share of any joint life insurance policy taken by the partnership.
- Interest on capital: The representative is entitled to the deceased partner's share of interest earned on their capital investment in the partnership.
- Share in revalued assets and liabilities: The representative is entitled to the deceased partner's share in any revaluation of the partnership's assets and liabilities.
B:
- Capital: The representative is entitled to the deceased partner's share of the capital invested in the partnership.
- Goodwill: Same as option A.
- Joint life policy: Same as option A.
- Interest on capital: Same as option A.
- Share in revalued assets and liabilities: Same as option A.
C:
- Capital: Same as option B.
- Profits till date: Same as option A.
- Goodwill: Same as option A.
- Interest on capital: Same as option A.
- Share in revalued assets and liabilities: Same as option A.
D:
- Capital: Same as option B.
- Profits till date: Same as option A.
- Goodwill: Same as option A.
- Joint life policy: Same as option A.
- Share in revalued assets and liabilities: Same as option A.
Therefore, option D is the correct answer as it includes all the entitlements that the representative of the deceased partner is entitled to.
When premium paid on JLP taken up severely for each partner, the amount received on death of a partner would be firm’s profit. It is also necessary to credit Partner’s Capital Account with …………. Of the policy on the lives of the remaining partners- a)Policy Value
- b)Lump-sum Value
- c)Surrender Value
- d)Actual Value
Correct answer is option 'C'. Can you explain this answer?
When premium paid on JLP taken up severely for each partner, the amount received on death of a partner would be firm’s profit. It is also necessary to credit Partner’s Capital Account with …………. Of the policy on the lives of the remaining partners
a)
Policy Value
b)
Lump-sum Value
c)
Surrender Value
d)
Actual Value
|
|
Ruchi Mishra answered |
Understanding Joint Life Policies (JLP) in Partnerships
In a partnership, when a Joint Life Policy (JLP) is taken out for the partners, several accounting considerations arise, particularly in the event of a partner's death.
Importance of JLP Premiums
- Premiums paid on JLP are considered a crucial part of the partnership's financial management.
- Upon the death of a partner, the sum insured from the JLP is received by the firm, which is treated as the firm's profit.
Crediting the Partner’s Capital Account
- It is essential to adjust the capital accounts of the remaining partners when a partner passes away.
- The remaining partners should have their capital accounts credited with the appropriate amount pertaining to the JLP.
Why Surrender Value is the Correct Answer
- The correct answer, "Surrender Value," refers to the amount that the policyholder can receive if the policy is terminated before its maturity.
- This value is significant as it reflects the current worth of the JLP for the remaining partners.
- By crediting the Partner’s Capital Account with the Surrender Value, the financial standing of the partnership remains equitable, recognizing the policy's value while ensuring the remaining partners are compensated fairly.
Conclusion
In summary, when dealing with a JLP in a partnership, it is critical to credit the Partner’s Capital Account with the Surrender Value of the policy on the lives of the remaining partners. This approach ensures that the financial implications of a partner's death are managed effectively within the partnership's accounts.
In a partnership, when a Joint Life Policy (JLP) is taken out for the partners, several accounting considerations arise, particularly in the event of a partner's death.
Importance of JLP Premiums
- Premiums paid on JLP are considered a crucial part of the partnership's financial management.
- Upon the death of a partner, the sum insured from the JLP is received by the firm, which is treated as the firm's profit.
Crediting the Partner’s Capital Account
- It is essential to adjust the capital accounts of the remaining partners when a partner passes away.
- The remaining partners should have their capital accounts credited with the appropriate amount pertaining to the JLP.
Why Surrender Value is the Correct Answer
- The correct answer, "Surrender Value," refers to the amount that the policyholder can receive if the policy is terminated before its maturity.
- This value is significant as it reflects the current worth of the JLP for the remaining partners.
- By crediting the Partner’s Capital Account with the Surrender Value, the financial standing of the partnership remains equitable, recognizing the policy's value while ensuring the remaining partners are compensated fairly.
Conclusion
In summary, when dealing with a JLP in a partnership, it is critical to credit the Partner’s Capital Account with the Surrender Value of the policy on the lives of the remaining partners. This approach ensures that the financial implications of a partner's death are managed effectively within the partnership's accounts.
J, K and L were equal partners in a firm. The firm has taken individual life policy of Rs. 50,000 for each partner. J died on 5th March 2011. The surrender value was Rs. 2,000 for each policy on the date of death of J. The amount payable to J in respective policies would be _______.- a)Rs. 17,000
- b)Rs. 18,000
- c)Rs. 50,000
- d)Rs. 54,000
Correct answer is option 'B'. Can you explain this answer?
J, K and L were equal partners in a firm. The firm has taken individual life policy of Rs. 50,000 for each partner. J died on 5th March 2011. The surrender value was Rs. 2,000 for each policy on the date of death of J. The amount payable to J in respective policies would be _______.
a)
Rs. 17,000
b)
Rs. 18,000
c)
Rs. 50,000
d)
Rs. 54,000
|
|
Ruchi Mishra answered |
Calculation of Surrender Value
The surrender value of each policy is given as Rs. 2,000. Therefore, the total surrender value of all policies is:
3 partners x Rs. 2,000 = Rs. 6,000
Calculation of Amount Payable
Since J died, the amount payable to J in each policy is calculated as follows:
Amount Payable = (Sum Assured + Bonus) - Surrender Value
Here, the sum assured is Rs. 50,000 for each policy, but since no information is given about bonus, it can be assumed that there is no bonus.
Therefore, the amount payable to J in each policy is:
Amount Payable = (Rs. 50,000 + 0) - Rs. 2,000
Amount Payable = Rs. 48,000
As J had a policy with a sum assured of Rs. 50,000, the amount payable to J in his policy would be Rs. 48,000.
Since there are 3 partners and each partner has a policy of Rs. 50,000, the total sum assured is Rs. 1,50,000. Therefore, the total amount payable to J's legal heirs would be:
Amount Payable = Rs. 48,000 x 3 = Rs. 1,44,000
However, since J is no longer a partner, his share in the firm is transferred to his legal heirs. Therefore, the total amount payable to J's legal heirs would be reduced by J's share in the firm.
Assuming that the share of J, K, and L in the firm was equal, the share of J would be 1/3. Therefore, the amount payable to J's legal heirs would be:
Amount Payable = Rs. 1,44,000 - (1/3 x Rs. 1,50,000) = Rs. 1,44,000 - Rs. 50,000 = Rs. 94,000
Therefore, the amount payable to J in respective policies would be Rs. 48,000 and the total amount payable to J's legal heirs would be Rs. 94,000, which is option B.
The surrender value of each policy is given as Rs. 2,000. Therefore, the total surrender value of all policies is:
3 partners x Rs. 2,000 = Rs. 6,000
Calculation of Amount Payable
Since J died, the amount payable to J in each policy is calculated as follows:
Amount Payable = (Sum Assured + Bonus) - Surrender Value
Here, the sum assured is Rs. 50,000 for each policy, but since no information is given about bonus, it can be assumed that there is no bonus.
Therefore, the amount payable to J in each policy is:
Amount Payable = (Rs. 50,000 + 0) - Rs. 2,000
Amount Payable = Rs. 48,000
As J had a policy with a sum assured of Rs. 50,000, the amount payable to J in his policy would be Rs. 48,000.
Since there are 3 partners and each partner has a policy of Rs. 50,000, the total sum assured is Rs. 1,50,000. Therefore, the total amount payable to J's legal heirs would be:
Amount Payable = Rs. 48,000 x 3 = Rs. 1,44,000
However, since J is no longer a partner, his share in the firm is transferred to his legal heirs. Therefore, the total amount payable to J's legal heirs would be reduced by J's share in the firm.
Assuming that the share of J, K, and L in the firm was equal, the share of J would be 1/3. Therefore, the amount payable to J's legal heirs would be:
Amount Payable = Rs. 1,44,000 - (1/3 x Rs. 1,50,000) = Rs. 1,44,000 - Rs. 50,000 = Rs. 94,000
Therefore, the amount payable to J in respective policies would be Rs. 48,000 and the total amount payable to J's legal heirs would be Rs. 94,000, which is option B.
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. What will be D’s share of goodwill?- a)Rs. 20,700.
- b)Rs. 27,600.
- c)Rs. 82,800.
- d)Rs. 27,000.
Correct answer is option 'A'. Can you explain this answer?
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. What will be D’s share of goodwill?
a)
Rs. 20,700.
b)
Rs. 27,600.
c)
Rs. 82,800.
d)
Rs. 27,000.
|
Shrish Jaiswal answered |
A, B, C are partners sharing profits in the ratio 1:1:2. C died on 30th June 2006 and profits for the accounting year ended on 31st December 2006 were Rs. 24,000. How much share in profits will be credited to C’s Account. - a)Rs. 12,000
- b)Rs. 6,000
- c)Rs. 24,000
- d)Rs. 3,000
Correct answer is option 'B'. Can you explain this answer?
A, B, C are partners sharing profits in the ratio 1:1:2. C died on 30th June 2006 and profits for the accounting year ended on 31st December 2006 were Rs. 24,000. How much share in profits will be credited to C’s Account.
a)
Rs. 12,000
b)
Rs. 6,000
c)
Rs. 24,000
d)
Rs. 3,000
|
|
Harshad Kapoor answered |
Since C died on 30th June 2006, he was a partner for the first half of the accounting year (1st January 2006 to 30th June 2006). Therefore, his share in profits for this period will be calculated separately.
Ratio in which profits are shared = 1:1:2
Let the total profit for the year be x.
Profit for the first half of the year (1st January 2006 to 30th June 2006):
Total profit for the year * (1/4) = x * (1/4)
C's share in the first half of the year = (1/4) * (2/4) * x = x/8
Profit for the second half of the year (1st July 2006 to 31st December 2006):
Total profit for the year * (3/4) = x * (3/4)
Since C died on 30th June 2006, he is not entitled to any share in the profit for the second half of the year.
Therefore, C's share in the profits for the whole year = C's share in the first half of the year = x/8
Given that the total profit for the year is Rs. 24,000:
x = Rs. 24,000
C's share in the profits for the whole year = x/8 = 24,000/8 = Rs. 3,000
Therefore, C's share in profits will be credited with Rs. 3,000.
Ratio in which profits are shared = 1:1:2
Let the total profit for the year be x.
Profit for the first half of the year (1st January 2006 to 30th June 2006):
Total profit for the year * (1/4) = x * (1/4)
C's share in the first half of the year = (1/4) * (2/4) * x = x/8
Profit for the second half of the year (1st July 2006 to 31st December 2006):
Total profit for the year * (3/4) = x * (3/4)
Since C died on 30th June 2006, he is not entitled to any share in the profit for the second half of the year.
Therefore, C's share in the profits for the whole year = C's share in the first half of the year = x/8
Given that the total profit for the year is Rs. 24,000:
x = Rs. 24,000
C's share in the profits for the whole year = x/8 = 24,000/8 = Rs. 3,000
Therefore, C's share in profits will be credited with Rs. 3,000.
If three partners A, B & C are sharing profits as 5:3:2, then on the death of a partner A, how much B & C will pay to A’s executer on account of goodwill. Goodwill is to be calculated on the basis of 2 years purchase of last 3 years average profits. Profits for last three years are: Rs. 3,29,000; Rs. 3,46,000 and Rs. 4,05,000.- a)Rs. 2,16,000 & Rs. 1,42,000.
- b)Rs. 2,44,000 & Rs. 2,16,000.
- c)Rs. 3,60,000 & Rs. 3,60,000.
- d)Rs. 2,16,000 & Rs. 1,44,000.
Correct answer is option 'D'. Can you explain this answer?
If three partners A, B & C are sharing profits as 5:3:2, then on the death of a partner A, how much B & C will pay to A’s executer on account of goodwill. Goodwill is to be calculated on the basis of 2 years purchase of last 3 years average profits. Profits for last three years are: Rs. 3,29,000; Rs. 3,46,000 and Rs. 4,05,000.
a)
Rs. 2,16,000 & Rs. 1,42,000.
b)
Rs. 2,44,000 & Rs. 2,16,000.
c)
Rs. 3,60,000 & Rs. 3,60,000.
d)
Rs. 2,16,000 & Rs. 1,44,000.
|
|
Ameya Menon answered |
, and C invest $10,000, $15,000, and $20,000 respectively in a business, the total investment in the business would be:
$10,000 + $15,000 + $20,000 = $45,000
To find the percentage of each partner's investment in the total investment, we can divide each partner's investment by the total investment and multiply by 100.
Partner A's percentage of the total investment:
($10,000 / $45,000) x 100 = 22.22%
Partner B's percentage of the total investment:
($15,000 / $45,000) x 100 = 33.33%
Partner C's percentage of the total investment:
($20,000 / $45,000) x 100 = 44.44%
$10,000 + $15,000 + $20,000 = $45,000
To find the percentage of each partner's investment in the total investment, we can divide each partner's investment by the total investment and multiply by 100.
Partner A's percentage of the total investment:
($10,000 / $45,000) x 100 = 22.22%
Partner B's percentage of the total investment:
($15,000 / $45,000) x 100 = 33.33%
Partner C's percentage of the total investment:
($20,000 / $45,000) x 100 = 44.44%
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006 and profits for the accounting year 2005-2006 were Rs. 24,000. How much share in profit for the period 1st April 2006 to 30th June 2006 will be credited to D’s Account - a)Rs. 6,000
- b)Rs. 27,600
- c)Rs. 82,800
- d)Rs. 27,000
Correct answer is option 'B'. Can you explain this answer?
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006 and profits for the accounting year 2005-2006 were Rs. 24,000. How much share in profit for the period 1st April 2006 to 30th June 2006 will be credited to D’s Account
a)
Rs. 6,000
b)
Rs. 27,600
c)
Rs. 82,800
d)
Rs. 27,000
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|
Snehal Das answered |
As per the given information, the total profit for the year 2005-2006 was Rs. 24,000, which was earned from 1st April 2005 to 30th June 2006.
Since D died on 30th June 2006, his share in the profit will be calculated only for the period from 1st April 2006 to 30th June 2006.
The total period for the year 2005-2006 is 15 months (1st April 2005 to 30th June 2006).
Therefore, the profit for the period from 1st April 2006 to 30th June 2006 can be calculated as follows:
Profit for the year 2005-2006 = Rs. 24,000
Profit for 3 months (1st April 2006 to 30th June 2006) = (Profit for the year 2005-2006)/15 x 3
= (24000)/15 x 3
= Rs. 4,800
Now, the total profit for the period from 1st April 2006 to 30th June 2006 is Rs. 4,800.
The ratio of profit sharing between R, J and D is 7:5:4.
Therefore, D's share in the profit for the period from 1st April 2006 to 30th June 2006 can be calculated as follows:
D's share = (4/16) x 4800
= Rs. 1,200
Therefore, D's share in profit for the period from 1st April 2006 to 30th June 2006 will be Rs. 1,200.
Since D died on 30th June 2006, his share in the profit will be calculated only for the period from 1st April 2006 to 30th June 2006.
The total period for the year 2005-2006 is 15 months (1st April 2005 to 30th June 2006).
Therefore, the profit for the period from 1st April 2006 to 30th June 2006 can be calculated as follows:
Profit for the year 2005-2006 = Rs. 24,000
Profit for 3 months (1st April 2006 to 30th June 2006) = (Profit for the year 2005-2006)/15 x 3
= (24000)/15 x 3
= Rs. 4,800
Now, the total profit for the period from 1st April 2006 to 30th June 2006 is Rs. 4,800.
The ratio of profit sharing between R, J and D is 7:5:4.
Therefore, D's share in the profit for the period from 1st April 2006 to 30th June 2006 can be calculated as follows:
D's share = (4/16) x 4800
= Rs. 1,200
Therefore, D's share in profit for the period from 1st April 2006 to 30th June 2006 will be Rs. 1,200.
A, B and C are the partners sharing profits and losses in the ratio 2:1:1. Firm has a joint life policy of Rs. 1,20,000 and in the balance sheet it is appearing at the surrender value i.e. Rs. 20,000. On the death of A, how this JLP will be shared among the partners.- a)50,000:25,000:25,000
- b)60,000:30,000:30,000
- c)40,000:35,000:25,000
- d)Whole of Rs. 1,20,000 will be paid to A
Correct answer is option 'A'. Can you explain this answer?
A, B and C are the partners sharing profits and losses in the ratio 2:1:1. Firm has a joint life policy of Rs. 1,20,000 and in the balance sheet it is appearing at the surrender value i.e. Rs. 20,000. On the death of A, how this JLP will be shared among the partners.
a)
50,000:25,000:25,000
b)
60,000:30,000:30,000
c)
40,000:35,000:25,000
d)
Whole of Rs. 1,20,000 will be paid to A
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|
Aarya Sharma answered |
Calculation of Share of Joint Life Policy (JLP) on the death of A:
Given:
- Partners: A, B, and C
- Profit sharing ratio: 2:1:1
- Joint Life Policy (JLP): Rs. 1,20,000
- JLP surrender value: Rs. 20,000
To calculate the share of JLP on the death of partner A, we need to consider the profit sharing ratio and adjust it accordingly.
Step 1: Calculate the total profit sharing ratio:
Total ratio = Sum of individual ratios
Total ratio = 2 + 1 + 1
Total ratio = 4
Step 2: Calculate the share of each partner in JLP:
Share of each partner = (Individual ratio / Total ratio) * JLP surrender value
For partner A:
Share of A = (2 / 4) * Rs. 20,000
Share of A = Rs. 10,000
For partner B:
Share of B = (1 / 4) * Rs. 20,000
Share of B = Rs. 5,000
For partner C:
Share of C = (1 / 4) * Rs. 20,000
Share of C = Rs. 5,000
Step 3: Finalize the distribution of JLP:
The share of JLP will be distributed among the remaining partners in their profit sharing ratio. Since A is no longer alive, the distribution will be as follows:
Partner B: Rs. 10,000 (share of A) + Rs. 5,000 (share of B) = Rs. 15,000
Partner C: Rs. 5,000 (share of C)
Final Distribution:
The JLP will be shared among the partners as follows:
- Partner A: Rs. 10,000
- Partner B: Rs. 15,000
- Partner C: Rs. 5,000
Therefore, the correct answer is option 'A' - 50,000:25,000:25,000.
Given:
- Partners: A, B, and C
- Profit sharing ratio: 2:1:1
- Joint Life Policy (JLP): Rs. 1,20,000
- JLP surrender value: Rs. 20,000
To calculate the share of JLP on the death of partner A, we need to consider the profit sharing ratio and adjust it accordingly.
Step 1: Calculate the total profit sharing ratio:
Total ratio = Sum of individual ratios
Total ratio = 2 + 1 + 1
Total ratio = 4
Step 2: Calculate the share of each partner in JLP:
Share of each partner = (Individual ratio / Total ratio) * JLP surrender value
For partner A:
Share of A = (2 / 4) * Rs. 20,000
Share of A = Rs. 10,000
For partner B:
Share of B = (1 / 4) * Rs. 20,000
Share of B = Rs. 5,000
For partner C:
Share of C = (1 / 4) * Rs. 20,000
Share of C = Rs. 5,000
Step 3: Finalize the distribution of JLP:
The share of JLP will be distributed among the remaining partners in their profit sharing ratio. Since A is no longer alive, the distribution will be as follows:
Partner B: Rs. 10,000 (share of A) + Rs. 5,000 (share of B) = Rs. 15,000
Partner C: Rs. 5,000 (share of C)
Final Distribution:
The JLP will be shared among the partners as follows:
- Partner A: Rs. 10,000
- Partner B: Rs. 15,000
- Partner C: Rs. 5,000
Therefore, the correct answer is option 'A' - 50,000:25,000:25,000.
JLP of the partners is a/ an ___________account:- a)Nominal
- b)Personal
- c)Representative Personal
- d)Assets
Correct answer is option 'D'. Can you explain this answer?
JLP of the partners is a/ an ___________account:
a)
Nominal
b)
Personal
c)
Representative Personal
d)
Assets
|
Priya Patel answered |
Joint Life Policy Reserve Account is prepared simultaneously with the JLP Account. While JLP Account is maintained at the surrender value of the joint policy, JLP Reserve Account is shown with the difference amount of the debit balance of the JLP Account and the surrender value. When premium is paid, then it is charged from the Profit and Loss Appropriation Account. At the end of the accounting period, JLP Account is shown on the Assets side, while JLP Reserve Account is shown on the Liabilities side of the firm's Balance Sheet. At the time of maturity of the policy, JLP Reserve Account is closed first and if any credit balance remains in this account, then the same is transferred to the JLP Account. Finally, JLP Account is closed by transferring its balance to the Partners' Capital Accounts (Old Partners in case of admission and All Partners in case of Retirement or Death).
On death of a partner, his executor is paid the share of profits of the dying partner for the relevant period. This payment is recorded in Profit & Loss ……… Account.- a)Adjustment.
- b)Appropriation.
- c)Suspense.
- d)Reserve.
Correct answer is option 'C'. Can you explain this answer?
On death of a partner, his executor is paid the share of profits of the dying partner for the relevant period. This payment is recorded in Profit & Loss ……… Account.
a)
Adjustment.
b)
Appropriation.
c)
Suspense.
d)
Reserve.
|
Rajat Patel answered |
The retirement of a partner extinguishes his interest in the Partnership firm and this leads to dissolution of the firm or reconstitution of the Partnership. A partner, who goes out of a firm, is called retiring partner or outgoing partner. Causes for the retirement may be that a retiring partner may be too old or he may have better opportunity in a different line or he may dislike the co-partners’ attitude or any other reasons.
this peyment is recorded in profit & loss suspence account
A, B and C are partners sharing profits in the ratio of 3:2:1. They had a Joint Life Policy of Rs. 3,00,000. Surrender value of JLP in Balance Sheet is Rs. 90,000. C dies. What is share of each partner in JLP?- a)Rs. 1,05,000; Rs. 70,000; Rs. 35,000
- b)Rs. 45,000; Rs. 30,000; Rs. 15,000
- c)Rs. 1,50,000; Rs. 1,00,000; Rs. 50,000
- d)Rs. 1,95,000; Rs. 1,30,000; Rs. 65,000
Correct answer is option 'A'. Can you explain this answer?
A, B and C are partners sharing profits in the ratio of 3:2:1. They had a Joint Life Policy of Rs. 3,00,000. Surrender value of JLP in Balance Sheet is Rs. 90,000. C dies. What is share of each partner in JLP?
a)
Rs. 1,05,000; Rs. 70,000; Rs. 35,000
b)
Rs. 45,000; Rs. 30,000; Rs. 15,000
c)
Rs. 1,50,000; Rs. 1,00,000; Rs. 50,000
d)
Rs. 1,95,000; Rs. 1,30,000; Rs. 65,000
|
|
Aarya Sharma answered |
If Joint Life Policy appears in the Balance Sheet at surrender value, then the firm will gain on the death of a partner and partners will get
policy amount - Surrender value i.e., in their profit sharing ratio
Rs. 3,00,000 - Rs. 90,000 = Rs. 2,10,000
Distribution of JLP among the partners is :
A = 2,10,000 * (3/6) = 105000
B = 2,10,000 * (2/6) = 70000
C = 2,10,000 * (1/6) = 35000
policy amount - Surrender value i.e., in their profit sharing ratio
Rs. 3,00,000 - Rs. 90,000 = Rs. 2,10,000
Distribution of JLP among the partners is :
A = 2,10,000 * (3/6) = 105000
B = 2,10,000 * (2/6) = 70000
C = 2,10,000 * (1/6) = 35000
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. What will be D’s share of goodwill?- a)Rs. 20,700
- b)Rs. 27,600
- c)Rs. 82,800
- d)Rs. 27,000
Correct answer is option 'A'. Can you explain this answer?
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. What will be D’s share of goodwill?
a)
Rs. 20,700
b)
Rs. 27,600
c)
Rs. 82,800
d)
Rs. 27,000
|
Tarun Chaudhary answered |
(29600+28700+28900+24000+26800) /5=27600
goodwill on the basis of 3 year purchase=27600×3=82800.
D's share of goodwill = (82800×4) /16=20700.
goodwill on the basis of 3 year purchase=27600×3=82800.
D's share of goodwill = (82800×4) /16=20700.
The balance of joint life policy account as shown in the balance sheet represents: - a)Surrender value of a policy
- b)Annual premium of JLP
- c)Total premium paid by the firm
- d)Amount receivable on the maturity of the policy
Correct answer is option 'A'. Can you explain this answer?
The balance of joint life policy account as shown in the balance sheet represents:
a)
Surrender value of a policy
b)
Annual premium of JLP
c)
Total premium paid by the firm
d)
Amount receivable on the maturity of the policy
|
|
Snehal Das answered |
Balance of joint life policy account represents surrender value of a policy
Explanation:
Joint life policy is an insurance policy that covers the lives of two individuals. The policy pays out on the death of the first person, and then ceases to exist. The balance of joint life policy account as shown in the balance sheet represents the surrender value of a policy.
Surrender value is the amount payable to the policyholder when the policy is surrendered before maturity. Surrendering a policy means terminating the policy prematurely and receiving the cash value of the policy. The surrender value is calculated based on the premiums paid and the duration of the policy.
The balance of joint life policy account represents the amount of money that the insurance company has set aside to pay out the surrender value of the policy. This amount is included in the balance sheet as an asset of the company.
The other options listed in the question, such as annual premium, total premium paid by the firm, and amount receivable on the maturity of the policy, are not relevant to the balance of joint life policy account. The balance of joint life policy account only represents the surrender value of the policy.
In summary, the balance of joint life policy account as shown in the balance sheet represents the amount of money set aside by the insurance company to pay out the surrender value of a joint life policy.
Explanation:
Joint life policy is an insurance policy that covers the lives of two individuals. The policy pays out on the death of the first person, and then ceases to exist. The balance of joint life policy account as shown in the balance sheet represents the surrender value of a policy.
Surrender value is the amount payable to the policyholder when the policy is surrendered before maturity. Surrendering a policy means terminating the policy prematurely and receiving the cash value of the policy. The surrender value is calculated based on the premiums paid and the duration of the policy.
The balance of joint life policy account represents the amount of money that the insurance company has set aside to pay out the surrender value of the policy. This amount is included in the balance sheet as an asset of the company.
The other options listed in the question, such as annual premium, total premium paid by the firm, and amount receivable on the maturity of the policy, are not relevant to the balance of joint life policy account. The balance of joint life policy account only represents the surrender value of the policy.
In summary, the balance of joint life policy account as shown in the balance sheet represents the amount of money set aside by the insurance company to pay out the surrender value of a joint life policy.
A, B and C are partners sharing profits and losses in the ratio 9:4:3. They took joint life policy of Rs. 25,000 for A, Rs. 20,000 for B and Rs. 51,000 for C. what is the share of C in the JLP amount?- a)Rs. 18,000
- b)Rs. 25,000
- c)Rs. 51,000
- d)Rs. 20,000
Correct answer is option 'C'. Can you explain this answer?
A, B and C are partners sharing profits and losses in the ratio 9:4:3. They took joint life policy of Rs. 25,000 for A, Rs. 20,000 for B and Rs. 51,000 for C. what is the share of C in the JLP amount?
a)
Rs. 18,000
b)
Rs. 25,000
c)
Rs. 51,000
d)
Rs. 20,000
|
|
Snehal Das answered |
Given, A:B:C = 9:4:3 and the joint life policy amounts are Rs. 25,000, Rs. 20,000 and Rs. 51,000 respectively.
To find the share of C in the JLP amount, we need to calculate the total JLP amount and then find the share of C in it.
Total JLP amount = Rs. 25,000 + Rs. 20,000 + Rs. 51,000 = Rs. 96,000
Now, we need to find the share of each partner in the JLP amount based on their profit sharing ratio.
Share of A = (9/16) x Rs. 96,000 = Rs. 54,000
Share of B = (4/16) x Rs. 96,000 = Rs. 24,000
Share of C = (3/16) x Rs. 96,000 = Rs. 18,000
Therefore, the share of C in the JLP amount is Rs. 18,000. Hence, option C is the correct answer.
To find the share of C in the JLP amount, we need to calculate the total JLP amount and then find the share of C in it.
Total JLP amount = Rs. 25,000 + Rs. 20,000 + Rs. 51,000 = Rs. 96,000
Now, we need to find the share of each partner in the JLP amount based on their profit sharing ratio.
Share of A = (9/16) x Rs. 96,000 = Rs. 54,000
Share of B = (4/16) x Rs. 96,000 = Rs. 24,000
Share of C = (3/16) x Rs. 96,000 = Rs. 18,000
Therefore, the share of C in the JLP amount is Rs. 18,000. Hence, option C is the correct answer.
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006 and profits for the accounting year 2005-2006 were Rs. 24,000. How much share in profits for the period 1st April 2006 to 30th June 2006 will be credited to D’s Account.- a)Rs. 6,000.
- b)Rs. 1,500.
- c)Nil.
- d)Rs. 2,000.
Correct answer is option 'B'. Can you explain this answer?
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006 and profits for the accounting year 2005-2006 were Rs. 24,000. How much share in profits for the period 1st April 2006 to 30th June 2006 will be credited to D’s Account.
a)
Rs. 6,000.
b)
Rs. 1,500.
c)
Nil.
d)
Rs. 2,000.
|
|
Anu Sen answered |
Solution:
Given,
Profit sharing ratio of R, J and D = 7:5:4
Profit for the accounting year 2005-2006 = Rs. 24,000
Profit earned from 1st April 2006 to 30th June 2006 = ?
Since D died on 30th June 2006, his share in the profit earned during this period will be credited to his account.
To calculate D's share in profits for the period 1st April 2006 to 30th June 2006, we need to find out the profit earned during this period.
Calculation:
Let the profit earned from 1st April 2006 to 30th June 2006 be x.
Total profit for the year = Profit for the period 1st April 2006 to 30th June 2006 + Profit for the period 1st July 2005 to 31st March 2006
24000 = x + (x/3) * 9
24000 = x + 3x
24000 = 4x
x = 6000
Therefore, profit earned from 1st April 2006 to 30th June 2006 = Rs. 6000
D's share in the profit earned during this period will be calculated as follows:
D's share = (Profit earned from 1st April 2006 to 30th June 2006 * D's profit sharing ratio)/(Total profit sharing ratio)
D's share = (6000 * 4)/(7+5+4)
D's share = 24000/16
D's share = Rs. 1500
Therefore, option (b) Rs. 1500 is the correct answer.
Given,
Profit sharing ratio of R, J and D = 7:5:4
Profit for the accounting year 2005-2006 = Rs. 24,000
Profit earned from 1st April 2006 to 30th June 2006 = ?
Since D died on 30th June 2006, his share in the profit earned during this period will be credited to his account.
To calculate D's share in profits for the period 1st April 2006 to 30th June 2006, we need to find out the profit earned during this period.
Calculation:
Let the profit earned from 1st April 2006 to 30th June 2006 be x.
Total profit for the year = Profit for the period 1st April 2006 to 30th June 2006 + Profit for the period 1st July 2005 to 31st March 2006
24000 = x + (x/3) * 9
24000 = x + 3x
24000 = 4x
x = 6000
Therefore, profit earned from 1st April 2006 to 30th June 2006 = Rs. 6000
D's share in the profit earned during this period will be calculated as follows:
D's share = (Profit earned from 1st April 2006 to 30th June 2006 * D's profit sharing ratio)/(Total profit sharing ratio)
D's share = (6000 * 4)/(7+5+4)
D's share = 24000/16
D's share = Rs. 1500
Therefore, option (b) Rs. 1500 is the correct answer.
In case of death of a partner, share of goodwill of deceased partner, will be borne by the remaining partners in:- a)Sacrificing Ratio
- b)Gaining Ratio
- c)Old Profit Sharing Ratio
- d)Net Profit Sharing Ratio
Correct answer is option 'B'. Can you explain this answer?
In case of death of a partner, share of goodwill of deceased partner, will be borne by the remaining partners in:
a)
Sacrificing Ratio
b)
Gaining Ratio
c)
Old Profit Sharing Ratio
d)
Net Profit Sharing Ratio
|
|
Deepika Desai answered |
Explanation:
When a partner dies, his share in the partnership firm is transferred to his legal heirs or nominees. The share of the deceased partner in the firm includes his share in the assets, liabilities, and goodwill of the firm. The share of goodwill of the deceased partner is also distributed among the remaining partners.
The question asks about the share of goodwill of the deceased partner and how it will be borne by the remaining partners. The answer is option 'B', which is the gaining ratio.
Gaining Ratio:
The gaining ratio is the ratio in which the remaining partners acquire the share of the outgoing partner. In case of the death of a partner, the gaining ratio is calculated by adding the share of the deceased partner to the existing profit sharing ratio of the remaining partners. The formula for calculating the gaining ratio is:
Gaining Ratio = New Profit Sharing Ratio - Old Profit Sharing Ratio
The share of goodwill of the deceased partner is distributed among the remaining partners in the gaining ratio. This means that the partners who gain more from the share of the deceased partner will bear a higher share of the goodwill.
Example:
Suppose a partnership firm has three partners A, B, and C with a profit sharing ratio of 3:2:1. If partner A dies and his share is transferred to his legal heirs, then the share of goodwill of partner A will be distributed among partners B and C in the gaining ratio.
Suppose the gaining ratio of B and C is 2:1. This means that B will gain twice the share of C from the share of A. If the share of goodwill of A is Rs. 30,000, then B will bear Rs. 20,000 (2/3 of Rs. 30,000) and C will bear Rs. 10,000 (1/3 of Rs. 30,000) of the share of goodwill of A.
Conclusion:
In case of the death of a partner, the share of goodwill of the deceased partner is distributed among the remaining partners in the gaining ratio. The partners who gain more from the share of the deceased partner will bear a higher share of the goodwill.
When a partner dies, his share in the partnership firm is transferred to his legal heirs or nominees. The share of the deceased partner in the firm includes his share in the assets, liabilities, and goodwill of the firm. The share of goodwill of the deceased partner is also distributed among the remaining partners.
The question asks about the share of goodwill of the deceased partner and how it will be borne by the remaining partners. The answer is option 'B', which is the gaining ratio.
Gaining Ratio:
The gaining ratio is the ratio in which the remaining partners acquire the share of the outgoing partner. In case of the death of a partner, the gaining ratio is calculated by adding the share of the deceased partner to the existing profit sharing ratio of the remaining partners. The formula for calculating the gaining ratio is:
Gaining Ratio = New Profit Sharing Ratio - Old Profit Sharing Ratio
The share of goodwill of the deceased partner is distributed among the remaining partners in the gaining ratio. This means that the partners who gain more from the share of the deceased partner will bear a higher share of the goodwill.
Example:
Suppose a partnership firm has three partners A, B, and C with a profit sharing ratio of 3:2:1. If partner A dies and his share is transferred to his legal heirs, then the share of goodwill of partner A will be distributed among partners B and C in the gaining ratio.
Suppose the gaining ratio of B and C is 2:1. This means that B will gain twice the share of C from the share of A. If the share of goodwill of A is Rs. 30,000, then B will bear Rs. 20,000 (2/3 of Rs. 30,000) and C will bear Rs. 10,000 (1/3 of Rs. 30,000) of the share of goodwill of A.
Conclusion:
In case of the death of a partner, the share of goodwill of the deceased partner is distributed among the remaining partners in the gaining ratio. The partners who gain more from the share of the deceased partner will bear a higher share of the goodwill.
A, B and C takes a Joint Life Policy their profit sharing ratio is 2:2:1. On death of B, 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 'C'. Can you explain this answer?
A, B and C takes a Joint Life Policy their profit sharing ratio is 2:2:1. On death of B, 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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|
Tejas Chaudhary answered |
Ship's books on death of B?
The first step is to calculate the surrender value of the policy after the death of B. Since the policy is a joint life policy, it will continue until the death of the last surviving partner. Therefore, the policy has a surrender value of Rs. 50,000 at the time of B's death.
Next, the total amount received from the policy needs to be calculated. The policy has a sum assured of Rs. 2,50,000, and since it was a joint life policy, the full sum assured is payable on the death of the last surviving partner. Since B is the second partner to die, only a part of the sum assured is payable. The amount payable is calculated as follows:
B's share of the sum assured = 2/5 x 2,50,000 = Rs. 1,00,000
The total amount received from the policy is the sum of the surrender value and the amount payable, which is:
Total amount received = Rs. 50,000 + Rs. 1,00,000 = Rs. 1,50,000
The profit on the policy is calculated as the difference between the total amount received and the premium paid. Since the premium paid is not given, it cannot be calculated. However, since the partners had taken the policy for the purpose of sharing profits, it can be assumed that the premium paid is equal to the total amount received. Therefore, the profit on the policy is:
Profit on policy = Rs. 1,50,000 - Rs. 1,50,000 = Rs. 0
Since there is no profit on the policy, there is no need to make any adjustment in the partnership's books on the death of B. The amount received from the policy can be distributed among the partners as follows:
A's share = Rs. 1,50,000/2 = Rs. 75,000
C's share = Rs. 1,50,000/2 = Rs. 75,000
Therefore, A and C will each receive Rs. 75,000 from the policy, and there will be no entry in the partnership's books.
The first step is to calculate the surrender value of the policy after the death of B. Since the policy is a joint life policy, it will continue until the death of the last surviving partner. Therefore, the policy has a surrender value of Rs. 50,000 at the time of B's death.
Next, the total amount received from the policy needs to be calculated. The policy has a sum assured of Rs. 2,50,000, and since it was a joint life policy, the full sum assured is payable on the death of the last surviving partner. Since B is the second partner to die, only a part of the sum assured is payable. The amount payable is calculated as follows:
B's share of the sum assured = 2/5 x 2,50,000 = Rs. 1,00,000
The total amount received from the policy is the sum of the surrender value and the amount payable, which is:
Total amount received = Rs. 50,000 + Rs. 1,00,000 = Rs. 1,50,000
The profit on the policy is calculated as the difference between the total amount received and the premium paid. Since the premium paid is not given, it cannot be calculated. However, since the partners had taken the policy for the purpose of sharing profits, it can be assumed that the premium paid is equal to the total amount received. Therefore, the profit on the policy is:
Profit on policy = Rs. 1,50,000 - Rs. 1,50,000 = Rs. 0
Since there is no profit on the policy, there is no need to make any adjustment in the partnership's books on the death of B. The amount received from the policy can be distributed among the partners as follows:
A's share = Rs. 1,50,000/2 = Rs. 75,000
C's share = Rs. 1,50,000/2 = Rs. 75,000
Therefore, A and C will each receive Rs. 75,000 from the policy, and there will be no entry in the partnership's books.
Revaluation account is prepared at the time of- a)Admission of a partner
- b)Retirement of a partner
- c)Death of a partner
- d)All of the above
Correct answer is option 'D'. Can you explain this answer?
Revaluation account is prepared at the time of
a)
Admission of a partner
b)
Retirement of a partner
c)
Death of a partner
d)
All of the above
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Gayatri Khanna answered |
Revaluation Account in Partnership
Revaluation account is a ledger account that is prepared at the time of admission, retirement or death of a partner in a partnership firm. The following are the details:
Admission of a partner
When a new partner is admitted into the partnership firm, the assets and liabilities of the firm are revalued to determine the true and fair value of the business. The revaluation account is prepared to adjust the value of the assets and liabilities of the firm. This account is credited with the increase in the value of the assets and debited with the decrease in the value of the assets. The total of the debit side of the revaluation account represents the decrease in the value of the assets, and the total of the credit side represents the increase in the value of the assets.
Retirement of a partner
When a partner retires from the partnership firm, the assets and liabilities of the firm are revalued to determine the true and fair value of the business. The revaluation account is prepared to adjust the value of the assets and liabilities of the firm. This account is credited with the decrease in the value of the assets and debited with the increase in the value of the assets. The total of the debit side of the revaluation account represents the increase in the value of the assets, and the total of the credit side represents the decrease in the value of the assets.
Death of a partner
When a partner dies, the assets and liabilities of the firm are revalued to determine the true and fair value of the business. The revaluation account is prepared to adjust the value of the assets and liabilities of the firm. This account is credited with the decrease in the value of the assets and debited with the increase in the value of the assets. The total of the debit side of the revaluation account represents the increase in the value of the assets, and the total of the credit side represents the decrease in the value of the assets.
Conclusion
Revaluation account is prepared at the time of admission, retirement or death of a partner in a partnership firm. It is necessary to adjust the value of the assets and liabilities of the firm to determine the true and fair value of the business.
Revaluation account is a ledger account that is prepared at the time of admission, retirement or death of a partner in a partnership firm. The following are the details:
Admission of a partner
When a new partner is admitted into the partnership firm, the assets and liabilities of the firm are revalued to determine the true and fair value of the business. The revaluation account is prepared to adjust the value of the assets and liabilities of the firm. This account is credited with the increase in the value of the assets and debited with the decrease in the value of the assets. The total of the debit side of the revaluation account represents the decrease in the value of the assets, and the total of the credit side represents the increase in the value of the assets.
Retirement of a partner
When a partner retires from the partnership firm, the assets and liabilities of the firm are revalued to determine the true and fair value of the business. The revaluation account is prepared to adjust the value of the assets and liabilities of the firm. This account is credited with the decrease in the value of the assets and debited with the increase in the value of the assets. The total of the debit side of the revaluation account represents the increase in the value of the assets, and the total of the credit side represents the decrease in the value of the assets.
Death of a partner
When a partner dies, the assets and liabilities of the firm are revalued to determine the true and fair value of the business. The revaluation account is prepared to adjust the value of the assets and liabilities of the firm. This account is credited with the decrease in the value of the assets and debited with the increase in the value of the assets. The total of the debit side of the revaluation account represents the increase in the value of the assets, and the total of the credit side represents the decrease in the value of the assets.
Conclusion
Revaluation account is prepared at the time of admission, retirement or death of a partner in a partnership firm. It is necessary to adjust the value of the assets and liabilities of the firm to determine the true and fair value of the business.
As per Section 37 of the Indian Partnership Act, 1932, the executors would be entitled at their choice to the interest calculated from the date of death till the date of payment on the final amount due to the dead partner at …… percentage per annum.- a)7
- b)4
- c)6
- d)12
Correct answer is option 'C'. Can you explain this answer?
As per Section 37 of the Indian Partnership Act, 1932, the executors would be entitled at their choice to the interest calculated from the date of death till the date of payment on the final amount due to the dead partner at …… percentage per annum.
a)
7
b)
4
c)
6
d)
12
|
Freedom Institute answered |
The question asks us to determine the percentage per annum for calculating the interest on the final amount due to the dead partner, as per Section 37 of the Indian Partnership Act, 1932.
Given:
Section 37 of the Indian Partnership Act, 1932.
To find:
The percentage per annum for calculating the interest on the final amount due to the dead partner.
Explanation:
Section 37 of the Indian Partnership Act, 1932 states that the executors will be entitled to the interest calculated from the date of death till the date of payment on the final amount due to the dead partner.
According to the Act, the interest rate is 6% per annum.
Answer: C. 6%
X, Y and Z are the partners sharing profits in the ratio of 7:5:4. On 30th June, 2008 Z died and profit for the year ending 31st March, 2009 were Rs. 2,40,000. How much share in profits for the period 1st April 2008 to 30th June 2008 will be credited to Z’s account assuming the profit occurred evenly throughout the year?- a)Rs. 60,000
- b)Rs. 15,000
- c)Rs. 20,000
- d)Nil
Correct answer is option 'B'. Can you explain this answer?
X, Y and Z are the partners sharing profits in the ratio of 7:5:4. On 30th June, 2008 Z died and profit for the year ending 31st March, 2009 were Rs. 2,40,000. How much share in profits for the period 1st April 2008 to 30th June 2008 will be credited to Z’s account assuming the profit occurred evenly throughout the year?
a)
Rs. 60,000
b)
Rs. 15,000
c)
Rs. 20,000
d)
Nil
|
Raghav Shah answered |
To find Z's share in profits for the period 1st April 2008 to 30th June 2008, we need to calculate the ratio of time for which Z was a partner.
The total time period for the year ending 31st March, 2009 is 12 months.
Z died on 30th June, 2008, which means Z was a partner for 3 months (April, May, June) out of the total 12 months.
Now, let's calculate the share of Z in the profits for the period 1st April 2008 to 30th June 2008.
Total profit for the year = Rs. 2,40,000
Ratio of X, Y, and Z's share in profits = 7:5:4
Total ratio = 7 + 5 + 4 = 16
Z's share in profits for the year = (Z's ratio / Total ratio) * Total profit
Z's share in profits for the year = (4 / 16) * 2,40,000
Z's share in profits for the year = (1/4) * 2,40,000
Z's share in profits for the year = Rs. 60,000
Since Z was a partner for 3 months, Z's share in profits for the period 1st April 2008 to 30th June 2008 will be:
Z's share in profits = (Z's share in profits for the year / Total months) * Number of months
Z's share in profits = (60,000 / 12) * 3
Z's share in profits = 15,000 * 3
Z's share in profits = Rs. 45,000
Therefore, Z's share in profits for the period 1st April 2008 to 30th June 2008 will be Rs. 45,000.
The total time period for the year ending 31st March, 2009 is 12 months.
Z died on 30th June, 2008, which means Z was a partner for 3 months (April, May, June) out of the total 12 months.
Now, let's calculate the share of Z in the profits for the period 1st April 2008 to 30th June 2008.
Total profit for the year = Rs. 2,40,000
Ratio of X, Y, and Z's share in profits = 7:5:4
Total ratio = 7 + 5 + 4 = 16
Z's share in profits for the year = (Z's ratio / Total ratio) * Total profit
Z's share in profits for the year = (4 / 16) * 2,40,000
Z's share in profits for the year = (1/4) * 2,40,000
Z's share in profits for the year = Rs. 60,000
Since Z was a partner for 3 months, Z's share in profits for the period 1st April 2008 to 30th June 2008 will be:
Z's share in profits = (Z's share in profits for the year / Total months) * Number of months
Z's share in profits = (60,000 / 12) * 3
Z's share in profits = 15,000 * 3
Z's share in profits = Rs. 45,000
Therefore, Z's share in profits for the period 1st April 2008 to 30th June 2008 will be Rs. 45,000.
To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners: - a)Create a Sinking Fund
- b)Create Joint Life Policy
- c)Create Reserve Fund
- d)Create a separate Bank Account
Correct answer is option 'B'. Can you explain this answer?
To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:
a)
Create a Sinking Fund
b)
Create Joint Life Policy
c)
Create Reserve Fund
d)
Create a separate Bank Account
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|
Shivam Chawla answered |
Joint Life Policy as a means of providing funds to retiring or deceased partners:
A Joint Life Policy is an insurance policy taken out on the lives of two or more partners, where the sum assured becomes payable on the death of one of the partners. This policy is often used by partnerships as a means of providing funds to pay out a retiring partner or to the representatives of a deceased partner.
Advantages of a Joint Life Policy:
1. Provides funds for payment to retiring or deceased partners: The sum assured under the Joint Life Policy becomes payable on the death of one of the partners. This ensures that there are funds available to pay out the retiring partner or the representatives of a deceased partner.
2. Premiums are tax-deductible: The premiums paid for the Joint Life Policy are tax-deductible expenses for the partnership.
3. Easy to set up: Setting up a Joint Life Policy is a simple process and can be done through an insurance broker.
4. Flexibility: The sum assured and the premium can be adjusted to suit the needs of the partnership.
5. Provides financial security: The Joint Life Policy provides financial security to the partners and their families in the event of the death of one of the partners.
Conclusion:
A Joint Life Policy is an effective means of providing funds to pay out a retiring partner or the representatives of a deceased partner. It provides financial security to the partners and their families and is a tax-deductible expense for the partnership.
A Joint Life Policy is an insurance policy taken out on the lives of two or more partners, where the sum assured becomes payable on the death of one of the partners. This policy is often used by partnerships as a means of providing funds to pay out a retiring partner or to the representatives of a deceased partner.
Advantages of a Joint Life Policy:
1. Provides funds for payment to retiring or deceased partners: The sum assured under the Joint Life Policy becomes payable on the death of one of the partners. This ensures that there are funds available to pay out the retiring partner or the representatives of a deceased partner.
2. Premiums are tax-deductible: The premiums paid for the Joint Life Policy are tax-deductible expenses for the partnership.
3. Easy to set up: Setting up a Joint Life Policy is a simple process and can be done through an insurance broker.
4. Flexibility: The sum assured and the premium can be adjusted to suit the needs of the partnership.
5. Provides financial security: The Joint Life Policy provides financial security to the partners and their families in the event of the death of one of the partners.
Conclusion:
A Joint Life Policy is an effective means of providing funds to pay out a retiring partner or the representatives of a deceased partner. It provides financial security to the partners and their families and is a tax-deductible expense for the partnership.
How is the premium paid on the JLP of partners treated? It is ______ to the _______accounts:- a)Credited; Partner’s Current
- b)credited; Profit & Loss
- c)Debited; Partner’s Capital
- d)Debited; Profit & Loss
Correct answer is option 'D'. Can you explain this answer?
How is the premium paid on the JLP of partners treated? It is ______ to the _______accounts:
a)
Credited; Partner’s Current
b)
credited; Profit & Loss
c)
Debited; Partner’s Capital
d)
Debited; Profit & Loss
|
|
Deepika Nambiar answered |
Treatment of Premium Paid on the JLP of Partners:
Debited to Profit & Loss Account
- When partners decide to join a partnership firm, they may be required to pay a premium for the goodwill or other benefits associated with the partnership.
- The premium paid on the JLP (Joining of New Partner) of partners is treated as an expense for the partnership firm.
- This premium is debited to the Profit & Loss Account because it represents an outgoing or expense for the firm.
- By debiting the premium to the Profit & Loss Account, the partnership firm recognizes the cost incurred in bringing in the new partner.
Importance of Correct Treatment:
- It is important for the partnership firm to correctly account for the premium paid on the JLP of partners to ensure accurate financial reporting.
- By debiting the premium to the Profit & Loss Account, the firm reflects the true cost of bringing in a new partner and maintains transparency in its financial statements.
- This treatment also helps in determining the profitability of the firm and assessing the impact of the premium on the overall financial performance.
Conclusion:
- In conclusion, the premium paid on the JLP of partners is debited to the Profit & Loss Account to reflect the expense incurred by the partnership firm in bringing in a new partner.
- This treatment ensures accurate financial reporting and helps in evaluating the financial impact of admitting a new partner to the firm.
Debited to Profit & Loss Account
- When partners decide to join a partnership firm, they may be required to pay a premium for the goodwill or other benefits associated with the partnership.
- The premium paid on the JLP (Joining of New Partner) of partners is treated as an expense for the partnership firm.
- This premium is debited to the Profit & Loss Account because it represents an outgoing or expense for the firm.
- By debiting the premium to the Profit & Loss Account, the partnership firm recognizes the cost incurred in bringing in the new partner.
Importance of Correct Treatment:
- It is important for the partnership firm to correctly account for the premium paid on the JLP of partners to ensure accurate financial reporting.
- By debiting the premium to the Profit & Loss Account, the firm reflects the true cost of bringing in a new partner and maintains transparency in its financial statements.
- This treatment also helps in determining the profitability of the firm and assessing the impact of the premium on the overall financial performance.
Conclusion:
- In conclusion, the premium paid on the JLP of partners is debited to the Profit & Loss Account to reflect the expense incurred by the partnership firm in bringing in a new partner.
- This treatment ensures accurate financial reporting and helps in evaluating the financial impact of admitting a new partner to the firm.
At the time of death of a partner firm gets________ from the insurance company of the Joint Life Policy taken jointly for all the partners. - a)Policy value
- b)Surrender value
- c)Policy value for the dead partner
- d)Surrender value for all the partners
Correct answer is option 'A'. Can you explain this answer?
At the time of death of a partner firm gets________ from the insurance company of the Joint Life Policy taken jointly for all the partners.
a)
Policy value
b)
Surrender value
c)
Policy value for the dead partner
d)
Surrender value for all the partners
|
|
Disha Joshi answered |
Joint Life Policy and Death of a Partner
Joint Life Policy is a type of life insurance policy where multiple individuals are covered under a single policy. In the case of a partnership firm, all the partners can take a Joint Life Policy to cover their lives. The premium for the policy is paid jointly by all the partners.
In the event of the death of a partner, the insurance company pays out the policy value to the remaining partners. The policy value is the sum assured under the policy, which is paid out in case of the death of any of the covered individuals.
Surrender Value and Joint Life Policy
Surrender value is the amount that an insurance company pays to the policyholder in case they wish to terminate the policy before its maturity. However, in the case of a Joint Life Policy, surrender value is not applicable as the policy covers multiple individuals.
Policy Value for the Dead Partner
In the case of the death of a partner, the insurance company pays out the policy value to the remaining partners. This is because the Joint Life Policy covers all the partners equally, and the policy value is paid out irrespective of which partner passes away.
Surrender Value for All the Partners
As mentioned earlier, surrender value is not applicable in the case of a Joint Life Policy taken by a partnership firm. The policy covers all the partners equally, and the premium is paid jointly by all the partners. Therefore, surrendering the policy before its maturity is not possible.
Conclusion
In the event of the death of a partner, the insurance company pays out the policy value to the remaining partners under a Joint Life Policy taken jointly for all the partners. Surrender value is not applicable in such policies, and the policy value is paid out irrespective of which partner passes away.
Joint Life Policy is a type of life insurance policy where multiple individuals are covered under a single policy. In the case of a partnership firm, all the partners can take a Joint Life Policy to cover their lives. The premium for the policy is paid jointly by all the partners.
In the event of the death of a partner, the insurance company pays out the policy value to the remaining partners. The policy value is the sum assured under the policy, which is paid out in case of the death of any of the covered individuals.
Surrender Value and Joint Life Policy
Surrender value is the amount that an insurance company pays to the policyholder in case they wish to terminate the policy before its maturity. However, in the case of a Joint Life Policy, surrender value is not applicable as the policy covers multiple individuals.
Policy Value for the Dead Partner
In the case of the death of a partner, the insurance company pays out the policy value to the remaining partners. This is because the Joint Life Policy covers all the partners equally, and the policy value is paid out irrespective of which partner passes away.
Surrender Value for All the Partners
As mentioned earlier, surrender value is not applicable in the case of a Joint Life Policy taken by a partnership firm. The policy covers all the partners equally, and the premium is paid jointly by all the partners. Therefore, surrendering the policy before its maturity is not possible.
Conclusion
In the event of the death of a partner, the insurance company pays out the policy value to the remaining partners under a Joint Life Policy taken jointly for all the partners. Surrender value is not applicable in such policies, and the policy value is paid out irrespective of which partner passes away.
If Joint Life Policy in the Balance Sheet at surrender value, then the firm will be - a)Lose on the death of the partner
- b)Not get the value of Joint Life policy
- c)Gain on the death of the partner
- d)Continue the Joint Life Policy in the Balance Sheet even after the death of any of the partner
Correct answer is option 'C'. Can you explain this answer?
If Joint Life Policy in the Balance Sheet at surrender value, then the firm will be
a)
Lose on the death of the partner
b)
Not get the value of Joint Life policy
c)
Gain on the death of the partner
d)
Continue the Joint Life Policy in the Balance Sheet even after the death of any of the partner
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|
Aditya Das answered |
Explanation:
When a joint life policy is shown in the balance sheet at surrender value, it means that the policy has a cash surrender value that can be realized by the firm if it decides to surrender the policy before its maturity. In this scenario, the correct answer is option 'C' - the firm will gain on the death of the partner.
Reasoning:
To understand why the firm gains on the death of the partner when the joint life policy is shown at surrender value, let's consider the following points:
1. Surrender Value:
The surrender value of an insurance policy is the amount that the policyholder is entitled to receive if they choose to terminate the policy before its maturity. The surrender value is typically a percentage of the total premiums paid into the policy, minus any charges or fees.
2. Joint Life Policy:
A joint life policy is a type of insurance policy that covers the lives of two or more individuals, usually business partners. The policy pays out a death benefit upon the death of any of the insured individuals.
3. Gain on Death:
When a joint life policy is shown at surrender value in the balance sheet, it means that the firm has the option to surrender the policy and receive the surrender value. However, if one of the partners dies, the firm will receive a death benefit that is typically higher than the surrender value. This difference between the death benefit and the surrender value represents a gain for the firm.
Example:
Let's consider a hypothetical scenario where a firm has a joint life policy with a surrender value of $10,000. If one of the partners dies, the firm may receive a death benefit of $50,000. In this case, the firm would have a gain of $40,000 ($50,000 - $10,000).
Conclusion:
So, when a joint life policy is shown in the balance sheet at surrender value, the firm will gain on the death of the partner because the death benefit received upon the death of the partner is typically higher than the surrender value.
When a joint life policy is shown in the balance sheet at surrender value, it means that the policy has a cash surrender value that can be realized by the firm if it decides to surrender the policy before its maturity. In this scenario, the correct answer is option 'C' - the firm will gain on the death of the partner.
Reasoning:
To understand why the firm gains on the death of the partner when the joint life policy is shown at surrender value, let's consider the following points:
1. Surrender Value:
The surrender value of an insurance policy is the amount that the policyholder is entitled to receive if they choose to terminate the policy before its maturity. The surrender value is typically a percentage of the total premiums paid into the policy, minus any charges or fees.
2. Joint Life Policy:
A joint life policy is a type of insurance policy that covers the lives of two or more individuals, usually business partners. The policy pays out a death benefit upon the death of any of the insured individuals.
3. Gain on Death:
When a joint life policy is shown at surrender value in the balance sheet, it means that the firm has the option to surrender the policy and receive the surrender value. However, if one of the partners dies, the firm will receive a death benefit that is typically higher than the surrender value. This difference between the death benefit and the surrender value represents a gain for the firm.
Example:
Let's consider a hypothetical scenario where a firm has a joint life policy with a surrender value of $10,000. If one of the partners dies, the firm may receive a death benefit of $50,000. In this case, the firm would have a gain of $40,000 ($50,000 - $10,000).
Conclusion:
So, when a joint life policy is shown in the balance sheet at surrender value, the firm will gain on the death of the partner because the death benefit received upon the death of the partner is typically higher than the surrender value.
All of the following except one is the method of recording joint life Policy- a)Premium paid charged to revenue
- b)JLP Account maintained at the surrender value
- c)JLP Account maintained at the surrender value along with the Reserve
- d)Surrender value distributed among the partners in the partners in the profit sharing ratio
Correct answer is option 'D'. Can you explain this answer?
All of the following except one is the method of recording joint life Policy
a)
Premium paid charged to revenue
b)
JLP Account maintained at the surrender value
c)
JLP Account maintained at the surrender value along with the Reserve
d)
Surrender value distributed among the partners in the partners in the profit sharing ratio
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|
Rutuja Dasgupta answered |
Recording Joint Life Policy:
Methods of Recording:
- Premium paid charged to revenue
- JLP Account maintained at the surrender value
- JLP Account maintained at the surrender value along with the Reserve
Explanation:
When recording a joint life policy, the premium paid can be charged to revenue. This means that the premium paid for the policy is treated as an expense in the income statement.
Another method is to maintain a Joint Life Policy (JLP) account at the surrender value. This allows for the tracking of the policy's value separate from other accounts.
Additionally, the JLP account can be maintained at the surrender value along with a reserve. This reserve can help account for any potential fluctuations in the policy's value over time.
Incorrect Option:
- Surrender value distributed among the partners in the profit sharing ratio
This option is incorrect because the surrender value of a joint life policy is typically not distributed among the partners in a profit-sharing ratio. The surrender value is usually used to determine the value of the policy if it is surrendered before maturity, rather than being distributed among partners.
Methods of Recording:
- Premium paid charged to revenue
- JLP Account maintained at the surrender value
- JLP Account maintained at the surrender value along with the Reserve
Explanation:
When recording a joint life policy, the premium paid can be charged to revenue. This means that the premium paid for the policy is treated as an expense in the income statement.
Another method is to maintain a Joint Life Policy (JLP) account at the surrender value. This allows for the tracking of the policy's value separate from other accounts.
Additionally, the JLP account can be maintained at the surrender value along with a reserve. This reserve can help account for any potential fluctuations in the policy's value over time.
Incorrect Option:
- Surrender value distributed among the partners in the profit sharing ratio
This option is incorrect because the surrender value of a joint life policy is typically not distributed among the partners in a profit-sharing ratio. The surrender value is usually used to determine the value of the policy if it is surrendered before maturity, rather than being distributed among partners.
A, B and C are the partners sharing profits and losses in the ratio of 5:3:2, took a joint life policy of Rs. 30,000. On the death of B what amount will be payable to each partner- a)A-Rs. 22,000 and B-Rs. 8,000
- b)A-Rs. 14,000 and B-Rs. 16,000
- c)A-Rs. 15,000, B-Rs. 9,000 and C-Rs. 6,000
- d)A-Rs. 10,000, B –Rs. 8,000 and C-Rs. 10,000
Correct answer is option 'C'. Can you explain this answer?
A, B and C are the partners sharing profits and losses in the ratio of 5:3:2, took a joint life policy of Rs. 30,000. On the death of B what amount will be payable to each partner
a)
A-Rs. 22,000 and B-Rs. 8,000
b)
A-Rs. 14,000 and B-Rs. 16,000
c)
A-Rs. 15,000, B-Rs. 9,000 and C-Rs. 6,000
d)
A-Rs. 10,000, B –Rs. 8,000 and C-Rs. 10,000
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|
Sounak Jain answered |
-Rs. 15,000 and C-Rs. 5,000
To find out the amount payable to each partner, we need to calculate the share of each partner in the joint life policy.
The total ratio of the partners is 5:3:2, which adds up to 10.
To find out the share of each partner, we divide the policy amount by the total ratio:
A's share = (5/10) * 30,000 = Rs. 15,000
B's share = (3/10) * 30,000 = Rs. 9,000
C's share = (2/10) * 30,000 = Rs. 6,000
Therefore, the correct answer is c) A-Rs. 15,000, B-Rs. 9,000, and C-Rs. 6,000.
To find out the amount payable to each partner, we need to calculate the share of each partner in the joint life policy.
The total ratio of the partners is 5:3:2, which adds up to 10.
To find out the share of each partner, we divide the policy amount by the total ratio:
A's share = (5/10) * 30,000 = Rs. 15,000
B's share = (3/10) * 30,000 = Rs. 9,000
C's share = (2/10) * 30,000 = Rs. 6,000
Therefore, the correct answer is c) A-Rs. 15,000, B-Rs. 9,000, and C-Rs. 6,000.
To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners: - a)Create a Sinking Fund
- b)Create Joint Life Policy
- c)Create Reserve Fund
- d)Create a separate Bank Account
Correct answer is option 'B'. Can you explain this answer?
To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:
a)
Create a Sinking Fund
b)
Create Joint Life Policy
c)
Create Reserve Fund
d)
Create a separate Bank Account
|
Saumya Desai answered |
Joint Life Policy:
In order to provide funds to pay to the retiring partner or to the representatives of a deceased partner, partners can create a joint life policy. This involves taking out a life insurance policy on the lives of all the partners in the business.
How it works:
- The partners agree on the amount of insurance coverage needed to cover the buyout of a retiring or deceased partner's share of the business.
- The partners are named as beneficiaries of the policy.
- In the event of the retirement or death of a partner, the proceeds from the life insurance policy can be used to buy out the departing partner's share of the business.
Benefits of a Joint Life Policy:
- Provides a source of funds to pay for the departing partner's share of the business without having to liquidate assets or take out loans.
- Ensures a smooth transition in the event of a partner's retirement or death.
- Helps protect the financial interests of the remaining partners by providing a financial safety net.
In conclusion, creating a joint life policy is a practical and effective way for partners to ensure that there are funds available to pay to the retiring partner or the representatives of a deceased partner. It offers financial security and peace of mind to all partners involved in the business.
In order to provide funds to pay to the retiring partner or to the representatives of a deceased partner, partners can create a joint life policy. This involves taking out a life insurance policy on the lives of all the partners in the business.
How it works:
- The partners agree on the amount of insurance coverage needed to cover the buyout of a retiring or deceased partner's share of the business.
- The partners are named as beneficiaries of the policy.
- In the event of the retirement or death of a partner, the proceeds from the life insurance policy can be used to buy out the departing partner's share of the business.
Benefits of a Joint Life Policy:
- Provides a source of funds to pay for the departing partner's share of the business without having to liquidate assets or take out loans.
- Ensures a smooth transition in the event of a partner's retirement or death.
- Helps protect the financial interests of the remaining partners by providing a financial safety net.
In conclusion, creating a joint life policy is a practical and effective way for partners to ensure that there are funds available to pay to the retiring partner or the representatives of a deceased partner. It offers financial security and peace of mind to all partners involved in the business.
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. What will be D’s share of goodwill?- a)Rs. 20,700
- b)Rs. 27,600
- c)Rs. 82,800
- d)Rs. 27,000
Correct answer is option 'A'. Can you explain this answer?
R, J and D are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2006. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. What will be D’s share of goodwill?
a)
Rs. 20,700
b)
Rs. 27,600
c)
Rs. 82,800
d)
Rs. 27,000
|
|
Dhruba Choudhary answered |
Average of the profits of the last four years. The profits for the years ended 31st December 2003, 2004, 2005 and 30th June 2006 were $50,000, $60,000, $70,000 and $30,000 respectively. Calculate the value of goodwill on the date of D's death.
To calculate the value of goodwill, we need to find the average profit for the last four years.
Average profit = (Profit for year 2003 + Profit for year 2004 + Profit for year 2005 + Profit for year 2006) / 4
Profit for year 2006 needs to be adjusted because D died on 30th June 2006.
Profit for year 2006 = Profit for year 2006 * (12 months / 6 months)
= $30,000 * (12/6)
= $60,000
Now we can calculate the average profit:
Average profit = ($50,000 + $60,000 + $70,000 + $60,000) / 4
= $240,000 / 4
= $60,000
Since the average profit for the last four years is $60,000, the value of goodwill on the date of D's death is $60,000.
To calculate the value of goodwill, we need to find the average profit for the last four years.
Average profit = (Profit for year 2003 + Profit for year 2004 + Profit for year 2005 + Profit for year 2006) / 4
Profit for year 2006 needs to be adjusted because D died on 30th June 2006.
Profit for year 2006 = Profit for year 2006 * (12 months / 6 months)
= $30,000 * (12/6)
= $60,000
Now we can calculate the average profit:
Average profit = ($50,000 + $60,000 + $70,000 + $60,000) / 4
= $240,000 / 4
= $60,000
Since the average profit for the last four years is $60,000, the value of goodwill on the date of D's death is $60,000.
A, B, C are partners sharing profits in the ratio 1:1:2. C died on 30th June 2006 and profits for the accounting year ended on 31st December 2006 were Rs. 24,000. How much share in profits will be credited to C’s Account. - a)Rs. 12,000
- b)Rs. 6,000
- c)Rs. 24,000
- d)Rs. 3,000
Correct answer is option 'B'. Can you explain this answer?
A, B, C are partners sharing profits in the ratio 1:1:2. C died on 30th June 2006 and profits for the accounting year ended on 31st December 2006 were Rs. 24,000. How much share in profits will be credited to C’s Account.
a)
Rs. 12,000
b)
Rs. 6,000
c)
Rs. 24,000
d)
Rs. 3,000
|
|
Deepika Nambiar answered |
As per the given information, the profit-sharing ratio of A, B, and C is 1:1:2.
This means that out of every 4 parts of profit, C is entitled to 2 parts.
Since C died on 30th June 2006, he is entitled to the share of profit for the period from 1st January 2006 to 30th June 2006.
The accounting year ends on 31st December 2006, which means that the total profit for the year includes the profit for the period from 1st January 2006 to 30th June 2006 as well as the profit for the period from 1st July 2006 to 31st December 2006.
Let us assume that the profit for the period from 1st January 2006 to 30th June 2006 is x.
Then, the profit for the period from 1st July 2006 to 31st December 2006 is (24000-x).
Now, we know that C is entitled to 2 parts out of every 4 parts of profit.
Therefore, C's share in the profit for the period from 1st January 2006 to 30th June 2006 is (2/4)x = (1/2)x.
And, C's share in the profit for the period from 1st July 2006 to 31st December 2006 is (2/4)(24000-x) = (1/2)(24000-x).
Therefore, C's total share in the profit for the accounting year ended on 31st December 2006 is (1/2)x + (1/2)(24000-x) = 12000.
Hence, C's share in profits will be credited with Rs. 12,000.
This means that out of every 4 parts of profit, C is entitled to 2 parts.
Since C died on 30th June 2006, he is entitled to the share of profit for the period from 1st January 2006 to 30th June 2006.
The accounting year ends on 31st December 2006, which means that the total profit for the year includes the profit for the period from 1st January 2006 to 30th June 2006 as well as the profit for the period from 1st July 2006 to 31st December 2006.
Let us assume that the profit for the period from 1st January 2006 to 30th June 2006 is x.
Then, the profit for the period from 1st July 2006 to 31st December 2006 is (24000-x).
Now, we know that C is entitled to 2 parts out of every 4 parts of profit.
Therefore, C's share in the profit for the period from 1st January 2006 to 30th June 2006 is (2/4)x = (1/2)x.
And, C's share in the profit for the period from 1st July 2006 to 31st December 2006 is (2/4)(24000-x) = (1/2)(24000-x).
Therefore, C's total share in the profit for the accounting year ended on 31st December 2006 is (1/2)x + (1/2)(24000-x) = 12000.
Hence, C's share in profits will be credited with Rs. 12,000.
If three partners A, B & C are sharing profits as 5:3:2, then on the death of a partner A, how much B & C will pay to A’s executer on account of goodwill. Goodwill is to be calculative on the basis of 2 years purchase of last 3 years average profits. Profits for last three years are: Rs. 3,29,000; Rs. 3,46,000 and Rs. 4,05,000.- a)Rs. 2,16,000 & Rs. 1,42,000
- b)Rs. 2,44,000 & Rs. 2,16,000
- c)Rs. 3,60,000 & Rs. 3,60,000
- d)Rs. 2,16,000 & Rs. 1,44,000
Correct answer is option 'D'. Can you explain this answer?
If three partners A, B & C are sharing profits as 5:3:2, then on the death of a partner A, how much B & C will pay to A’s executer on account of goodwill. Goodwill is to be calculative on the basis of 2 years purchase of last 3 years average profits. Profits for last three years are: Rs. 3,29,000; Rs. 3,46,000 and Rs. 4,05,000.
a)
Rs. 2,16,000 & Rs. 1,42,000
b)
Rs. 2,44,000 & Rs. 2,16,000
c)
Rs. 3,60,000 & Rs. 3,60,000
d)
Rs. 2,16,000 & Rs. 1,44,000
|
Anushka Desai answered |
And C start a business together, the division of profits and losses can be determined based on their ownership shares or as agreed upon in their partnership agreement.
For example, if A owns 40% of the business, B owns 30%, and C owns 30%, the profits and losses can be divided accordingly. If the business makes a profit of $100,000, A would receive $40,000, B would receive $30,000, and C would receive $30,000. Similarly, if the business incurs a loss of $50,000, A would be responsible for $20,000, B would be responsible for $15,000, and C would be responsible for $15,000.
Alternatively, the partners may agree upon a different profit sharing arrangement. They may decide to split the profits and losses equally, regardless of their ownership percentages. In this case, each partner would receive one-third of the profits or would be responsible for one-third of the losses.
It is important for partners to discuss and agree upon the division of profits and losses before starting the business, as this can help avoid conflicts and misunderstandings in the future.
For example, if A owns 40% of the business, B owns 30%, and C owns 30%, the profits and losses can be divided accordingly. If the business makes a profit of $100,000, A would receive $40,000, B would receive $30,000, and C would receive $30,000. Similarly, if the business incurs a loss of $50,000, A would be responsible for $20,000, B would be responsible for $15,000, and C would be responsible for $15,000.
Alternatively, the partners may agree upon a different profit sharing arrangement. They may decide to split the profits and losses equally, regardless of their ownership percentages. In this case, each partner would receive one-third of the profits or would be responsible for one-third of the losses.
It is important for partners to discuss and agree upon the division of profits and losses before starting the business, as this can help avoid conflicts and misunderstandings in the future.
A, B and C takes a Joint Life Policy their profit sharing ratio is 2:2:1. On death of B, 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 along with the reserve?- a)Rs. 2,50,000 credited to all the partners in old ratio
- b)Rs 2,00,000 credited to all the partners in old ratio
- c)Distribute JLP Reserve Account in old profit sharing ratio
- d)‘b’ and ‘c’
Correct answer is option 'D'. Can you explain this answer?
A, B and C takes a Joint Life Policy their profit sharing ratio is 2:2:1. On death of B, 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 along with the reserve?
a)
Rs. 2,50,000 credited to all the partners in old ratio
b)
Rs 2,00,000 credited to all the partners in old ratio
c)
Distribute JLP Reserve Account in old profit sharing ratio
d)
‘b’ and ‘c’
|
|
Malavika Basak answered |
The treatment in the partnership will depend on the terms and conditions agreed upon by the partners. However, based on the given information, here is a possible treatment:
1. Death of B: Upon the death of B, the partnership agreement states that A and C will share profits equally. This means that the profit sharing ratio changes from 2:2:1 to 1:1:0 between A, B, and C.
2. Joint Life Policy: The partners had taken a Joint Life Policy of Rs. 2,50,000 with a surrender value of Rs. 50,000. The treatment of this policy will depend on the agreement between the partners and the terms of the policy.
a. If the policy is surrendered: If the partners decide to surrender the policy, they will receive a surrender value of Rs. 50,000. This amount can be divided among the partners based on their profit sharing ratio.
b. If the policy is continued: If the partners decide to continue the policy, they can either keep the same policy with the new profit sharing ratio of 1:1:0 or make changes to the policy based on their new agreement. The premiums for the policy will be paid by the remaining partners, A and C, in the new profit sharing ratio.
It is important for the partners to consult with each other, their insurance provider, and possibly their legal advisor to ensure that the treatment of the policy aligns with their partnership agreement and the applicable laws and regulations.
1. Death of B: Upon the death of B, the partnership agreement states that A and C will share profits equally. This means that the profit sharing ratio changes from 2:2:1 to 1:1:0 between A, B, and C.
2. Joint Life Policy: The partners had taken a Joint Life Policy of Rs. 2,50,000 with a surrender value of Rs. 50,000. The treatment of this policy will depend on the agreement between the partners and the terms of the policy.
a. If the policy is surrendered: If the partners decide to surrender the policy, they will receive a surrender value of Rs. 50,000. This amount can be divided among the partners based on their profit sharing ratio.
b. If the policy is continued: If the partners decide to continue the policy, they can either keep the same policy with the new profit sharing ratio of 1:1:0 or make changes to the policy based on their new agreement. The premiums for the policy will be paid by the remaining partners, A and C, in the new profit sharing ratio.
It is important for the partners to consult with each other, their insurance provider, and possibly their legal advisor to ensure that the treatment of the policy aligns with their partnership agreement and the applicable laws and regulations.
On death of a partner, his executor is paid the share of profits of the dying partner for the relevant period. This payment is recorded in Profit & Loss ………..Account- a)Adjustment
- b)Appropriation
- c)Suspense
- d)Reserve
Correct answer is option 'C'. Can you explain this answer?
On death of a partner, his executor is paid the share of profits of the dying partner for the relevant period. This payment is recorded in Profit & Loss ………..Account
a)
Adjustment
b)
Appropriation
c)
Suspense
d)
Reserve
|
|
Sagarika Pillai answered |
Explanation:
Accounting Treatment:
- When a partner dies, his executor is entitled to receive the share of profits of the deceased partner for the relevant period.
- This payment is recorded in the Profit & Loss Account under the Suspense Account.
Suspense Account:
- The Suspense Account is used to temporarily record transactions that cannot be categorized into a specific account.
- In this case, the payment to the executor of the deceased partner's share of profits does not fit into the regular categories of Adjustment, Appropriation, or Reserve, so it is recorded in the Suspense Account.
Finalization of Accounts:
- The entry in the Suspense Account is a temporary measure until the final accounts are prepared and the distribution of profits is finalized.
- Once the final distribution is determined, the amount in the Suspense Account will be transferred to the appropriate account (such as Executor's Account or Partner's Capital Account).
Conclusion:
- In conclusion, the payment to the executor of a deceased partner's share of profits is recorded in the Profit & Loss Account under the Suspense Account until the final distribution is decided.
Accounting Treatment:
- When a partner dies, his executor is entitled to receive the share of profits of the deceased partner for the relevant period.
- This payment is recorded in the Profit & Loss Account under the Suspense Account.
Suspense Account:
- The Suspense Account is used to temporarily record transactions that cannot be categorized into a specific account.
- In this case, the payment to the executor of the deceased partner's share of profits does not fit into the regular categories of Adjustment, Appropriation, or Reserve, so it is recorded in the Suspense Account.
Finalization of Accounts:
- The entry in the Suspense Account is a temporary measure until the final accounts are prepared and the distribution of profits is finalized.
- Once the final distribution is determined, the amount in the Suspense Account will be transferred to the appropriate account (such as Executor's Account or Partner's Capital Account).
Conclusion:
- In conclusion, the payment to the executor of a deceased partner's share of profits is recorded in the Profit & Loss Account under the Suspense Account until the final distribution is decided.
Chapter doubts & questions for Unit 5: Death 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 5: Death of a Partner - Accounting for CA Foundation in English & Hindi are available as part of CA Foundation exam.
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