Chapter MCQ Test 2 — Admission of a Partner
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A and B share 5:3. C is admitted for 1/4, taking 3/16 from A and 1/16 from B. C's share check and A's new share are:
C = 4/16 = 1/4; A = 10/16 − 3/16 = 7/16
A = 5/8
C = 1/8
A = 1/2
Explanation: A old 10/16 surrenders 3/16 → 7/16; B old 6/16 surrenders 1/16 → 5/16; C = 3/16+1/16 = 4/16 = 1/4.
Question 2 of 10
C is admitted for 1/5 and brings Rs 60,000 capital but no goodwill. Combined capital after admission (incl. C) is Rs 2,40,000. C's share of hidden goodwill is:
Rs 12,000
Rs 60,000
Rs 3,00,000
Nil
Explanation: Implied total = 60,000 × 5 = 3,00,000; hidden goodwill = 3,00,000 − 2,40,000 = 60,000; C's share = 60,000 × 1/5 = 12,000.
Question 3 of 10
C brings Rs 90,000 premium for goodwill; A and B sacrifice 2/15 and 1/15 respectively. A and B receive:
A Rs 60,000; B Rs 30,000
A Rs 45,000; B Rs 45,000
A Rs 30,000; B Rs 60,000
Equally Rs 45,000 each
Explanation: Sacrificing ratio 2:1, so premium 90,000 splits 60,000:30,000.
Question 4 of 10
Why does the NEW partner not share in the revaluation profit or accumulated reserves?
They arose before his admission and belong to the old partners
He is junior
It is illegal
He brought capital
Explanation: Past gains and reserves were earned under the old arrangement, so only the old partners share them.
Question 5 of 10
C is to bring capital for 1/4 share equal to his proportionate share of the firm's capital. Combined adjusted capital of A and B is Rs 1,80,000. C's capital should be:
Rs 60,000
Rs 45,000
Rs 1,80,000
Rs 2,40,000
Explanation: A+B (3/4) = 1,80,000 → total capital = 2,40,000; C's 1/4 = 60,000.
Question 6 of 10
When the premium for goodwill is brought in cash and then withdrawn by the old partners, the extra entry is:
Old Partners' Capital A/cs Dr; To Cash/Bank A/c
Cash A/c Dr; To Old Partners
Goodwill A/c Dr
No entry
Explanation: Withdrawal reduces their capital and pays out cash.
Question 7 of 10
On admission, stock (book Rs 50,000) is revalued to Rs 44,000 and an unrecorded investment of Rs 8,000 is brought in. The net revaluation effect is:
Profit of Rs 2,000
Loss of Rs 6,000
Profit of Rs 8,000
Loss of Rs 2,000
Explanation: Loss 6,000 (stock down) + gain 8,000 (unrecorded asset) = +2,000 profit to old partners.
Question 8 of 10
A and B share 3:2. C gets 1/4, acquired equally from A and B. The sacrificing ratio of A and B is:
1:1
3:2
2:3
5:3
Explanation: Each gives up 1/8, so the sacrificing ratio is 1:1 regardless of the old 3:2.
Question 9 of 10
Workmen Compensation Reserve Rs 40,000 with a claim of Rs 10,000 on admission: the treatment is:
Provide 10,000 as a liability; distribute the remaining 30,000 to old partners in old ratio
Distribute all 40,000
Ignore it
Give it to the new partner
Explanation: Only the surplus over the actual claim is a free reserve for the old partners; the claim becomes a liability.
Question 10 of 10
The fundamental reason a new partner pays a goodwill premium is to:
Compensate old partners for the share of future super-profits he will now enjoy
Buy the building
Pay the creditors
Increase his own capital only
Explanation: Goodwill reflects the firm's capacity to earn above-normal profit, a share of which the newcomer now takes from the old partners.