If partners A, B, and C share profits in the ratio of 5:3:2, what would be the new ratio if B retires and A and C continue sharing at 3:2?

A and C share at 3:2.

• B's retirement alters the ratio.

• A gains 1/10 share.

• C gains 2/10 share.

True or False: When calculating the new profit-sharing ratio after a partner retires, the old ratio must always be used.

False. The new profit-sharing ratio can differ from the old ratio if the remaining partners decide to share profits differently after the retirement.

Fill in the blank: The journal entry to reflect an increase in fixed assets due to revaluation is a debit to ___ and a credit to the capital accounts of the partners.

The respective asset account

What is the significance of a Joint Life Policy in a partnership?

Joint Life Policy offers financial security.

• Provides funds to the firm.

• Covers debts of deceased partners.

• Ensures business continuity and stability.

What happens to the reserve standing at the date of a partner's retirement?

Reserve adjusts to new ratio.

• Reflects new profit-sharing structure.

• Ensures fair distribution of reserves.

• Impacts continuing partners' finances.

How is the amount payable to a retiring partner settled if the partners decide on immediate payment?

Immediate payment is journaled.

• Debit Retiring Partner’s Capital.

• Credit Bank Account for payment.

• Reflects partner's departure.

Explain how the gaining ratio is determined when continuing partners acquire the share of the retiring partner in a specified ratio.

Gaining ratio is calculated based on shares.

• Share acquired by partners.

• Old share is added to gains.

• New shares are simplified accordingly.

True or False: A partner's share of goodwill is always recorded as an asset in the balance sheet of the reconstituted firm.

False. Goodwill can be valued but may not necessarily be recorded as an asset in the balance sheet of the reconstituted firm.

Fill in the blank: The journal entry for acknowledging a gain from the revaluation of assets due to a partner's retirement includes a credit to ___ accounts.

The capital

What is the method of accounting for premiums paid on a Joint Life Policy?

Premiums are treated as expenses.

• Can be expensed yearly.

• Adjust for surrender value.

• Impact on financial statements.

What adjustments are made when a partner retires from a partnership?

Adjustments for Retired Partner

• Revalue assets and liabilities.

• Update goodwill and policies.

• Transfer profits to partners' accounts.