Commerce Exam  >  Commerce Notes  >  Crash Course of Accountancy - Class 12  >  Sample Questions (Part - 1) - Retirement of a Partner Death of a Partner

Sample Questions (Part - 1) - Retirement of a Partner Death of a Partner | Crash Course of Accountancy - Class 12 - Commerce PDF Download

                                                               Retirement  Test

Time – 50 mins

M.M.- 30

Q1. A, B and C are the partners sharing profits and losses in the ratio of 5:3:2. C retired and his capital balance after adjustments regarding Reserves, Accumulated profits/ losses and gain/loss on revaluation was 2,50,000. C was paid 3,00,000 in full settlement. Afterwards D was admitted for 1/4th share . Calculate the amount of goodwill premium brought by D. (1 mark)


Q2. MM, KK and PP are partners in a firm. PP retired from the firm. After making adjustments for Reserves and Revaluation of Assets and Liabilities the balance in PP’s capital account was Rs.1,20,000. MM and KK paid Rs.1,80,000 in full settlement to PP. Identify the item for which MM and KK paid Rs.60,000 more to PP and pass the entry for the same. (1 mark)

Q3. X, Y and Z are partners in a firm sharing profits in the ratio of 3: 2 : 1. X retires from the firm. Y and Z agree that the capital of the new firm shall be fixed at Rs. 2,10,000 in the profit-sharing ratio. The capital accounts of Y and Z after all adjustments on the date of retirement showed balances of Rs. 1,45,000 and Rs. 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners. Pass the necessary journal entries. (3 mark)

Q4. A, B, C and D were partners sharing profits in the ratio of 3: 3: 2 : 2 respectively. On 1st April, 2014, D retired owing to ill health. It was decided by A, Band C that in future their profit-sharing ratio would be 3 : 2 : 1. Goodwill of the firm is valued at Rs. 6,00,000. Goodwill already appeared in the Balance Sheet at Rs. 50,000. Pass the necessary journal entries. (3 mark)

Q5. A, B, C and D were partners sharing profits in the ratio of 1:2:3:4. D retired and his share was acquired by A and B equally. Goodwill was valued at 3 year’s purchase of average profits of last 4 years, which were 40,000. General Reserve showed a balance of 1,30,000 and D’s Capital in the Balance Sheet was 3,00,000 at the time of D’s retirement. You are required to record necessary Journal entries in the books of the firm and prepare D’s capital account on his retirement. (4 mark)

Q6. A, B and C were partners sharing profits in the ratio of 3:5:2.  Their Balance Sheet as on 1st April, 2011 was as follows:

Liabilities

Rs

Assets

Rs

Creditors

20,000

Cash

16,000

Employees Provident Fund

26,000

Debtors

16,000

Capital A/c's:


Stock

80,000

A

1,00,000

Furniture

34,000

B

70,000

Building

1,20,000

C

50,000




2,66,000


2,66,000

B retires on the above date and it was agreed that:
a. B’s share of Goodwill was 8,000.
b. 5% provision for doubtful debts was to be made on debtors.
c. Sundry creditors were valued 4,000 more than the book value.  Pass necessary journal entries for the above transactions on B’s retirement. (4 mark)

Q7. Following is the Balance Sheet of kusum, ghusum and dishum who have agreed to share profits and losses in proportion of their capitals.
Sample Questions (Part - 1) - Retirement of a Partner Death of a Partner | Crash Course of Accountancy - Class 12 - CommerceSample Questions (Part - 1) - Retirement of a Partner Death of a Partner | Crash Course of Accountancy - Class 12 - Commerce

On 31st March, 2014, Kusum desired to retire from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities on that date, on the following basis:
(i) Land and Building to be appreciated by 30%.
(ii) Machinery be depreciated by 30%.
(iii) There were Bad Debts of Rs. 35,000.
(iv) The claim on account of Workmen Compensation Reserve was estimated at Rs. 15,000. 

(v) Goodwill of the firm was valued at Rs. 2,80,000
(vi) remaining partners decided to pay off cash immediately to the Retiring partners by bringing in cash in the new profit sharing ratio and also to leave a balance of Rs1,00,000 in their bank account.
(vii) they will also adjust their capitals in their new ratio which was 3:4 Prepare Revaluation Account & Capital Accounts of Partners only. (6 mark)

Q8. Baaji, Leela and Mastani were partners in a firm sharing profits in the ratio of 5:3:2. Their Balance Sheet on March 31, 2015 was as follows:

Liabilities


Assets


Creditors

70,000

Bank

44,000

Capitals:

2,06,000

Debtors

24,000

Baaji 90,000


Stock

60,000

Leela 56,000


Buildings

1,40,000

Mastani 60,000


Profit & Loss A/c

8,000

On April 1,2015 Leela retired on the following terms:
i. Building was to be depreciated by 10,000.
ii. A Provision of 5% was to be made on Debtors for doubtful debts.
iii. Salary outstanding was 4,800.
iv. Goodwill of the firm was valued at 1,40,000.
v. Leela was to be paid 20,800 through cheque and the balance was to be paid in two equal quarterly installments (starting from June 30, 2015) along with interest @ 10% p.a. Prepare Revaluation Account, partners’s Capital Account and leela Loan Account till it is finally paid. (8 mark)

The document Sample Questions (Part - 1) - Retirement of a Partner Death of a Partner | Crash Course of Accountancy - Class 12 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 12.
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FAQs on Sample Questions (Part - 1) - Retirement of a Partner Death of a Partner - Crash Course of Accountancy - Class 12 - Commerce

1. What is retirement of a partner?
Ans. Retirement of a partner refers to the withdrawal of a partner from a partnership firm. It can occur due to various reasons such as reaching the retirement age, health issues, or personal reasons. When a partner retires, their share in the firm's assets and liabilities is transferred to the remaining partners or new partners.
2. How is the retirement of a partner calculated?
Ans. The retirement of a partner is calculated by determining the value of their share in the partnership firm. This is done by assessing the firm's net assets and liabilities at the time of retirement. The retiring partner's share is then calculated based on their capital balance, share of profits, goodwill, and adjustments for any revaluation of assets and liabilities.
3. What is the impact of retirement of a partner on the firm's financial statements?
Ans. The retirement of a partner has a significant impact on a firm's financial statements. It leads to changes in the balance sheet, profit and loss account, and partner's capital accounts. The retiring partner's capital balance is transferred to the remaining partners' capital accounts, and any adjustments for goodwill or revaluation are made. The profit-sharing ratio and the capital structure of the firm also undergo changes.
4. How does the retirement of a partner affect the goodwill of a partnership firm?
Ans. The retirement of a partner can either increase or decrease the goodwill of a partnership firm. If the retiring partner has contributed significantly to the firm's goodwill, their retirement may lead to a decrease in goodwill. On the other hand, if the retiring partner's share is purchased by the remaining partners at a premium, it can result in an increase in goodwill. The impact on goodwill depends on the circumstances of the retirement and the agreement between the partners.
5. What are the legal formalities involved in the retirement of a partner?
Ans. The retirement of a partner involves certain legal formalities to ensure a smooth transition. These include drafting a retirement deed or agreement, notifying relevant authorities and third parties about the retirement, settling the retiring partner's accounts and dues, and updating partnership documents and registrations. It is advisable to consult with a legal professional to ensure compliance with applicable laws and regulations.
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