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QUESTION 1

Mr.C and Mr.D form a partnership and agree as under:


a) Mr. C contributes cash Rs.140,000 and transfers to the firm title of the office
premises, the book value of which was Rs.310,000. They mutually agreed to
the value of office premises to be Rs.500,000.
b) Mr. D contributed cash Rs.350,000 and hand over office equipment of
Rs.160,000.

REQUIRED:
Give entries in general Journal of the new firm to record investment made by each
partner.

QUESTION 2
Mr. A, Mr. B and Mr. C formed a partnership contributing equal amount of capital as
shown below:
Mr. A

Cash Rs.150,000, office equipment worth Rs.250,000

Mr. B -

Cash Rs.350,000 and merchandise for the amount of balance

Mr. C -

Machinery worth Rs.280,000 and the balance in the cash

It is agreed that capital of each partner should be equal to the capital of Mr. A.

REQUIRED:
a) Compute the initial capital of each partner in the partnership
b) Prepare entries in general Journal of the firm for the above transaction
c) Prepare balance sheet in classified form on the formation of the partnership
firm.

QUESTION 3
Mr. R & Mr. S, sole traders, were carrying on competing business. On May 15 2004
they decided to form a partnership under the name of RS TRADERS by merging
their business. On that date their balance sheet items were as follows:

Mr. R
Mr. S
Cash
12,000
Accounts Receivable
48,000
Merchandise Inventory
20,000
Office Supplies
1,600

8,000
40,000
32,000
2,000

Delivery Equipment Cost


48,000

60,000

Office Equipment Cost


32,000

28,000

Allowance for Depreciation- Delivery Equipment


16,000

32,000

Allowance for Depreciation - Office Equipment


20,000

12,000

Allowance for bad debts


1,600

2,800

Accounts Payable
38,000

32,000

The following valuation were agreed upon:


i.

ii.

Mr. R accounts receivable were estimated to realize Rs.25,500, his


merchandise inventory was valued Rs.28,000 and Delivery equipment
Rs.15,000
Mr. S accounts receivable were estimated to realize Rs.8,000. His office
supplies were valued Rs.600 and office equipment at Rs.5,000

REQUIRED:
a) Give entries in general Journal of the new firm to record the investments of
Mr. R and Mr. S.
b) Prepare initial balance sheet of the firm.

QUESTION 4
Mr. A & Mr. B, sole traders, are doing business separately. On January 1, 2001 their
balance sheets showed the following position:

Mr. A
Mr. B
Cash
40,000
Accounts Receivable
80,000
Merchandise Inventory
40,000

32,000
64,000
80,000

Office Supplies
3,200

4,000

Office Furniture
160,000

160,000

Office Equipment Cost


32,000

28,000

Allowance for Depreciation- Office Furniture


72,000

88,000

Allowance for bad debts


3,200

5,600

Accounts Payable
76,000

64,000

On January1, 2001 they decided to form a partnership by merging their business.


The assets and Liabilities were taken at the above book value in the new
partnership.
Mr. A and Mr. B decided that their capital in the new partnership will be Rs.200,000
and Rs.180,000 respectively. They contribute the deficiency, if any, from their
private funds.

REQUIRED:
Give the necessary entries in general Journal of the newly formed partnership of Mr.
A and Mr. B as on 1 January 2001.

Prepare a balance sheet of partnership firm as of January 1, 2001 after giving effect
to the arrangement agreed by them regarding their capital.

MCQs
1) In Partnership business there should be more than:
(a) 5 Persons
(b) 1 Person
(c) 10 Person
(d) 15 Person
2) In Partnership business the maximum limit of partners is:
(a) 50
(b) 35
(c) 25
(d) 20
3) The Partnership agreement in writing is called:
(a) Partnership registration
(b) Partnership at will
(c) Partnership deed
(d) Partnership certification
4) When Partnership business is established, it is called:
(a) Retirement
(b) Liquidation
(c) Admission
(d) Formation
5) A partner who takes an active part in matters of the firm is called:
(a) Minor Partner
(b) Senior Partner
(c) Active Partner
(d) Sleeping Partner
6) A partner who Lends his name & reputation to the firm is called:
(a) Active Partner
(b) Nominal Partner
(c) Minor Partner
(d) None
7) A partner who has not attained the age of maturity is called:
(a) Active Partner
(b) Nominal Partner
(c) Sleeping Partner
(d) Minor Partner
8) In case of merger of two sole proprietors, new value of assets and liabilities
are called:
(a) Agreed values
(b) Market values
(c) Cost values
(d) Fair Values

9) If a partner invest machine of Rs.80,000 with accumulated depreciation of


Rs.20,000, it will be recorded as:
(a) 100,000
(b) 20,000
(c) 80,000
(d) 60,000
10)
If a partner invest in the partnership business cash Rs.40,000,
Furniture Rs.30,000, Machine Rs.50,000, Accounts Payable Rs.20,000, his
capital is to be credited by:
(a) 120,000
(b) 60,000
(c) 100,000
(d) 40,000
11)
If Akram invest Rs.75,000, Ali invest Rs.150,000 & Umair invest in the
ratio of 1:2:3 respectively how much umair will bring:
(a) 125,000
(b) 225,000
(c) 175,000
(d) 87,500
12)
If Tahir invest cash Rs.60,000, Owais invest twice as Tahir the share of
partner in the firm will be:
(a) 1:1
(b) 1:2
(c) 1:3
(d) 1:4