ACCOUNTANCY – Test Paper 07

(Time 90 Mins. - Partnership Retirement) M.M 40

Q1. How do we account for goodwill at the time of retirement of a partner, when it does not appear in balance

sheet. (1)

Q2. A, B and C were sharing profits as 1/2 to A, 1/5 to B and 3/10 to C. C retires and his share is taken up by A

& C equally. Calculate the new profit sharing ratio and gaining ratio of A and B. (2)

Q3. X, Y and Z are sharing profits in the ratio of 9 : 7 : 4. Y retires. Amount due to Y on retirement on account

of goodwill, was calculated to be Rs. 42,000. Calculate new and gaining ratio assuming X contributes Rs.

24,000 and Z Rs. 18,000 to pay out Y. Also pass necessary journal entry. (3)

Q4a. Can the retired partner or the legal representative of a deceased partner claim a share firm the subsequent

profits of the firm?

Q4b. Why is it necessary to revalue the assets and liabilities in case of retirement of a partner?

Q4c. Mention any two circumstances under which the retiring partner’s capital account is debited. (4)

Q5a. Explain the provisions of section 37 of the Indian partnership Act 1932?

Q5b. A, B and C are the partners sharing profits in the ratio of 4 : 3 : 2. B retires and the amount due to him is

valued at Rs. 10,800, whereas it was agreed among the partners to pay him Rs. 16,800. Pass the required

entry. (4)

Q6. Mr. Sushant retired on 31st March 2020 and the amount due to him is Rs. 30,000. It was agreed to pay him

in two equal annual installments together with interest @12% p.a. Prepare Sushant’s loan account until it is

finally paid-off. (4)

Q7.Ram , Shyam & Bharat were partners in a firm sharing profits & losses in the ratio of 3 : 2 : 1.On the date of

Shyam’s retirement the Balance sheet showed workmen compensation reserve at Rs. 50,000, Investment

fluctuation reserve at Rs. 50,000 and Investments valued at Rs. 2,00,000. Pass necessary journal entry in the

following cases:

(a) When investments are valued at Rs. 2,20,000 & Claim towards workmen compensation is estimated to be

Rs. 40,000.

(b) When investments are valued at Rs. 1,80,000 & Claim towards workmen compensation is estimated to be

Rs. 62,000. (6)

Q8. A, B and C are partners sharing profits and losses as 4 : 3 : 2. B retires and A and C carry on in their old
ratio. Their Balance Sheet on the date of retirement is as under
Liabilities Rs. Assets Rs.
Capital Accounts: Land & Buildings 2,50,000
A 2,00,000 Machinery 70,000
B 2,52,000 Stock 3,00,000
C 1,48,000 6,00,000 Debtors 81,000
Sundry Creditors 1,10,000 Less: Provision (1,000) 80,000
Capital Reserve 9,000 Cash at Bank 10,000
Goodwill 9,000
7,19,000 7,19,000
Value of stock and buildings are to be increased by Rs. 30,000 and Rs. 50,000 respectively. Provision for
bad debts is not needed. While appropriating profits for the last year, an amount of Rs. 9,000 was wrongly
credited to Mr. B in excess. Compute new profit sharing ratio, gaining ratio and pass necessary journal
entries. (8)
Q9. The Balance Sheet of Arthur, Baldwin and Curtis who were sharing profits in proportion to their capitals
stood as follows on 31st December, 2019:
Liabilities Rs. Assets Rs.
Sundry creditors 6,900 Cash at bank 5,500
Capital accounts: Sundry debtors 5,000
Arthur 20,000 Less: Reserve 100 4,900
Baldwin 15,000
Curtis 10,000 45,000 Stock 8,000
Plant and machinery 8,500
Factory land & building 25,000
51,900 51,900
Mr. Baldwin retires and the following readjustments of the assets and liabilities have been agreed upon
before ascertainment of the amount payable by the firm to Mr. Baldwin:
(a) That the stock be decapitated by 6%
(b) That the reserve for doubtful debts be brought upto 5% on debtors
(c) That the factory land and building be appreciated by 20%.
(d) That a provision of Rs. 770 be made in respect of outstanding legal charges
(e) That the goodwill of the entire firm be fixed at Rs. 10,800 and Mr. Baldwin's share of the same be adjusted
into the accounts of Arthur and Curtis who are going to share future P/L as 5 : 3.
(f) That the entire capital of the firm as newly constituted be fixed at Rs. 28,000 between Arthur and Curtis in
the proportion of five-eights and three eights (i.e., actual cash to be paid off to or to be brought in by the
continuing partners as the case may be). Prepare revaluation account, capital account & Balance sheet after
retirement of Baldwin. (8)
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