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QUESTION – 11. Book debts were 1,00,000 as given in the balance sheet as on 31st March, 2022. On 1st April, 2022 the partners decided to share profits equally instead of distributing the profits in their capital ratio. On that date bad debts for 40,000 were written off and a new provision for doubtful debt is to be maintained @5%. How will you treat their adjustment in revaluation account of the firm. (12th June, 2023)
(a) revaluation account – debited by 45,000
(b) revaluation account – credited by 45,000
(c) revaluation account – debited by 43,000
(d) revaluation account – credited by – 43,000
QUESTION – 12. An extract of Balance Sheet as on 31 March 2023
| Liabilities | ₹ | Assets | ₹ |
| Provision for legal damages | 4,800 | Furniture | 41,000 |
| Premises | 85,000 |
Additional Information:
Premises found under-valued by 15% and provision for legal damages to be created upto 6,000.
On the basis of above information pass journal entry at the time of reconstitution of firm.
(a) Revaluation A/c Dr 16,500
To Premises A/c 15,000
To Provision for legal damages A/c 1,500
(b) Premises A/c Dr 15,000
To Revaluation A/c 15,000
Revaluation A/c Dr 1,200
To Provision for legal damages A/c 1,200
(c) Premises A/c Dr 15,000
To Revaluation A/c 15,000
Provision for legal damages A/c Dr 1,200
To Revaluation A/c 1,200
(d) Premises A/c Dr 12,750
To Revaluation A/c 12,750
Revaluation A/c Dr 1,200
To provision for legal damages A/c 1,200
QUESTION – 13. A, B and C are partners sharing profits in the ratio of 3:3:4. They decide to share the future profits equally. The sacrifice or gain of partners are: (17th May, 2024)
(a) A gains 1/30; B gains 1/30; C sacrifices 2/30
(b) A gains 2/30; B gains 1/30; C sacrifices 3/30
(c) A sacrifices 1/30; B gains 3/30; C sacrifices 2/30
(d) A gains 2/30; B gains 3/30; C sacrifices 5/30
QUESTION – 14. Which of the following would affect the Revaluation Account at the time of reconstitution of a partnership firm? (17th May, 2024)
(a) Increase in assets
(b) Drawings against capital
(c) Interest on capital
(d) Partner’s salary
QUESTION – 15. Profits made on Revaluation of Assets and Reassessment of Liabilities is distributed among whom? (20th May, 2023)
(a) All Partners
(b) Admitted Partner only
(c) Retiring Partner only
(d) Old Partners
QUESTION – 16. Calculate the Normal Rate of Return if normal profits are 30,000, Assets 5,30,000 and liabilities 30,000, while calculating the value of goodwill of the firm at the time of admission of a partner. (20th May, 2023)
(a) 5.6%
(b) 6%
(c) 5.3%
(d) 5%
QUESTION – 17. At the time of reconstitution of firm. Building was appearing in Old Books at a certain amount, which was overvalued by 20%. After reconstitution, Building appeared in the Books at 4,00,000. Determine the amount at which Building was appearing in Books before reconstitution. 25th May, 2023
(a) 5,00,000
(b) 3,20,000
(c) 5,20,000
(d) 4,80,000
QUESTION – 18. Profits earned by the business during the last 5 years were: 26th May, 2023
2018- 12,000
2019- 13,000
2020- 14,000
2021- 18,000
2022- 2,000
Calculate the amount of goodwill to be valued at 2 years purchase of average profits of last 5 year. –
(a) 24,000
(b) 22,000
(c) 55,000
(d) 11,000
QUESTION – 19. The Profit for the five years of a firm are as follows 4,00,000, 3,98,000, 4,50,000, 4,45,000 and 5,00,000. Calculate goodwill of the firm on the basis of 4 years purchase of average profit of last 5 years. – 26th May, 2023
(a) 16,98,000
(b) 14,45,800
(c) 17,54,400
(d) 19,36,600
QUESTION – 20. A, B & C were sharing profits & losses in the ratio of 3:2:1. They decided to share profits & losses equally in future. General reserve was appearing in their books at 60,000. Goodwill was valued at 1,20,000. The partners do not want to disturb the general reserve. 28th May, 2023
The adjusting entry will be:
(a) A’s capital A/c Dr 1,80,000
To C’s Capital A/c 1,80,000
(b) A’s capital A/c Dr 1,80,000
To B’s Capital A/c 1,20,000
To C’s Capital A/c 60,000
(c) C’s Capital A/c Dr 30,000
To A’s Capital A/c 30,000
(d) C’s Capital A/c Dr 1,80,000
To A’s Capital A/c 1,20,000
To B’s Capital A/c 60,000
SULUTION – 11. Ans. – (c)
Solution – Doubtful Debts = Book Debts – Bad Debts = 1,00,000 – 40,000 = 60,000
New Provision for doubtful debt = 60,000 × 5% = 3,000
Since, Bad Debts and Provision on Doubtful Debts both represent increase in liability, revaluation account will be debited by 40,000 + 3,000 = 43,000
SULUTION – 12. Ans. – (b)
(b) Premises A/c Dr 15,000
To Revaluation A/c 15,000
Revaluation A/c Dr 1,200
To Provision for legal damages A/c 1,200
Solution – Premises found under- valued by 15% which means the actual value must have been higher than the book value
Increase in Value of Premises = 85,000 × 15/85 = 15,000
Increase in Provision for Legal damages = 6,000 – 4,800 = 1,200
SULUTION – 13. Ans. – (a)
Solution – Old Ratio = A:B:C = 3:3:4
New Ratio = A:B:C = 1:1:1
A = 3/10 – 1/3 = (9-10)/30 = -1/30 (Gain)
B = 3/10 – 1/3 = (9-10)/30 = -1/30 (Gain)
C = 4/10 – 1/3 = (12-10)/30 = 2/30 (Sacrifice)
A gains 1/30, B gains 1/30, C sacrifices 2/30
SULUTION – 14. Ans. – (a)
Solution – An increase in assets would affect the Revaluation Account during the reconstitution of a partnership firm as it reflects changes in the value of assets and liabilitieS. –
SULUTION – 15. Ans. – (d)
Solution – Profits arising from the revaluation of assets and reassessment of liabilities are distributed among the old partners. –
SULUTION – 16. Ans. – (b)
Solution – Capital Employed = Total Assets – Liabilities = 5,30,000 – 30,000 = 5,00,000
Normal Rate of Return = Normal Profit × 100 / Net Assets = 30,000/5,00,000 × 100 = 6%
SULUTION – 17. Ans. – (d)
Solution – Amount at which Building was appearing in Books before reconstitution = 4,00,000 + 20% of 4,00,000 = 4,80,000
SULUTION – 18. Ans. – (b)
Solution – Average profits = (12,000 + 13,000 + 14,000 + 18,000 + 2,000)/5 = 59,000/5 = 11,800
Goodwill = 11,800 × 2 = 23,600 Answer is in in the option therefore you can choose (Closest option: 22,000)
SULUTION – 19. Ans. – (c)
Solution – Average profit = (4,00,000 + 3,98,000 + 4,50,000 + 4,45,000 + 5,00,000)/5 = 21,93,000/5 = 4,38,600
Goodwill = 4,38,600 × 4 = 17,54,400
SULUTION – 20. Ans. – (c)
Solution – Old ratio = A:B:C = 3:2:1
New ratio = A:B:C = 1:1:1
Gain/Sacrifice (Old Ratio – New Ratio)
A = 3/6 – 1/3 = 1/6 (Sacrifice)
B = 2/6 – 1/3 = 0
C = 1/6 – 1/3 = -1/6 (Gain)
Share in Reserve = 60,000 × 1/6 = 10,000
Share in Goodwill = 1,20,000 × 1/6 = 20,000
Total Share Gained by C = 10,000 + 20,000 = 30,000
Adjustment Entry:
C’s Capital A/c Dr. 30,000
To A’s Capital A/c 30,000
For Question No. 21-30 click here
