Question : A, M and N are in partnership, sharing profits in the proportion of two-thirds, one-sixth and one-sixth respectively.
A died on the 30th June, 2018, three months after the annual accounts had been prepared and in accordance with the partnership agreement, his share of the profits to the date of death was estimated on the basis of the profit for the preceding year. In addition to this, the agreement provided for interest on capital at 5 per cent per annum on the balance standing to the credit of the capital account at the date of the last Balance Sheet, and also for goodwill, which was to be brought into account at two year’s purchase of the average profits for the last three years. A’s capital on 31st March, 2018 stood at Rs.1,20,000, and his drawings from then to the date of death amounted to Rs.9,000. The net profits of the business for the three preceding years amounted to Rs.33,500; Rs.41,500 and Rs.40,500, respectively. Amount payable to A’s executors________________.
Option 1: Rs. 1,70,583
Option 2: Rs 1,70,580
Option 3: Rs 1,70,853
Option 4: None of the above
Correct Answer: None of the above
Solution : Answer = None of the above
Amount Payable to A's Excutor will be A's Capital Balance = 1,20,000 Add Interest on Capital = 1500 (1,20,000 × 5/100× 3/12 ) Add Goodwill (1,15,500 × 2/3) = (38500 × 2) = 77000 × 2/4 = 38,500 [A, M: N = 1/3 :1/6:1/6 = 2:1:1] Less Drawings = (9000) Add Profit (40500 × 2/4 ×3/12) = 5062.50 = 1,20,000 + 1500 + 38500 +5063 - 9000 = 1,56,063 Hence, the correct option is 4.
Question : P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided under the partnership deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profits credited to his account during the last 4 completed years (books of accounts are closed on 31st March). R died on 1st April, 2018. The firm's profits for the last 4 years were as follows: 2015 (Profits Rs. 1,20,000); 2016 (Profits Rs.60,000); 2017 (Losses Rs.20,000) and 2018 (Profits Rs. 80,000). The amount that should be credited to R in respect of his share of goodwill will be
Option 1: Rs 45,000
Option 2: Rs 90,000
Option 3: Rs 40,000
Option 4: None of the above.
Question : P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided under the partnership deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profits credited to his account during the last 4 completed years (books of accounts are closed on 31st March).
R died on 1st April 2018. The firm’s profits for the last 4 years were as follows: 2015 (Profits Rs. 1,20,000); 2016 (Profits Rs.60,000); 2017 (Losses Rs.20,000) and 2018 (Profits Rs. 80,000). Determine the amount that should be credited to R in respect of his share of goodwill.
Option 1: Rs 90,000
Option 2: Rs 30,000
Option 3: Rs 45,000
Option 4: Rs 60,000
Question : A, B and C are sharing profits in the ratio of 4:3:2. A dies on 31st December 2017. Accounts are closed on 31st March every year. Sales for the year ending 31st March 2017 amounted to Rs.4,00,000. Sales of Rs.3,30,000 amounted between the period from 1st April 2017 to 31st December 2017. The profit for the year ending 31st March 2017 amounted to Rs.60,000.
The deceased partner’s share in the current year’s profits of the firm will be
Option 1: Rs 24,000
Option 2: Rs 18,000
Option 3: Rs 10,000
Option 4: Rs 22,000
Question : Cake and Muffin are partners sharing profits and losses in the ratio of 5: 4. On 1st April, 2016, they admit Cookie as a new partner for 1/6th share in the profits of the firm and the new ratio agreed upon is 3: 2: 1.
Goodwill, at the time of Cookie's admission is to be valued on the basis of capitalisation of the average profits of the last three years. Profits for the last three years were : Year ended 31st March, 2014 Rs.39,000 (including an abnormal loss of Rs. 9,000). Year ended 31st March, 2015 Rs.83,000 (including an abnormal gain of Rs.8,000). Year ended 31st March, 2016 Rs.72,000. On 1st April, 2016, the firm had assets of Rs.8,00,000. Its creditors amounted to Rs.3,60,000. The firm had a Reserve Fund of Rs. 40,000 while Partners' Capital Accounts showed a balance of Rs.4,00,000. The normal rate of return expected from this class of business is 13%. Cookie brings in Rs.2,00,000 for her capital but is unable to bring in cash for her share of goodwill.
The amount of cookie brought his share of goodwill will be .....
Option 1: Rs 60,000
Option 2: Rs 50,000
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