Case Study Questions Chapter 3 Reconstitution Of A Partnership Firm – Admission Of A Partner

Students can read the Case Study questions given below for Reconstitution Of A Partnership Firm – Admission Of A Partner Class 12 Accountancy. All Reconstitution Of A Partnership Firm – Admission Of A Partner Class 12 Notes and questions with solutions have been prepared based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS. You should read all Case Study Questions provided by us and the Class 12 Accountancy Case Study Questions provided for all chapters to get better marks in examinations.

Case Study Questions of Reconstitution Of A Partnership Firm – Admission Of A Partner Class 12

Question.Any changes in the relations of partnership will result in the reconstitution of the partnership firm. All the reserves and surplus will be distributed among the partners into existing profit-sharing ratio. when it is decided by the partners to make changes in the existing ratio, a separate account is opened, which is known as profit and loss adjustment or revolution account to make the revaluation of assets and reassessment of liabilities
With a motive to calculate actual economic benefits.

Question.In case of change in profit-sharing ratio, the accumulated profits are distributed to the partners in
(a) new ratio
(b) old ratio
(c) sacrificing ratio
(d) equal ratio

Question.Revaluation Account is a:
(A) Real Account
(B) Nominal Account
(C) Personal Account
(D) None of the Above

Question.Any change in the relationship of existing partners which results in an end of the existing agreement and enforces making of new agreement is called:
(a) Revaluation of partnership
(b) Reconstitution of partnership
(c) Realization of partnership
(d) None of the above

Question.The Need of revaluation of assets and liabilities:
(A) Assets and Liabilities should appear at revised values
(B)Any profit and loss an account of change in values belong to old partners
(C) All unrecorded assets and liabilities get recorded
(D) None of Above

Question.Increase and decrease in the value of assets and liabilities are recorded through:
(a) Partners’ Capital Account
(b) Revaluation Account
(c) Profit and Loss Appropriation
(d) Balance Sheet

Read the following paragraph and answer the following Question from 1 to 3.
40 .Bhavya and Naman were partner in a firm carrying on a tiffin service in Hyderabad. Bhavya noticed that a lot of food is left at the end of the day. To avoid wastage, she suggested that it can be distributed to the needy. Naman wanted that It should be mixed with the food being served the next day. Naman then give a personal that if his share in the profit increased, he will not mind free distribution of leftover food. Bhavya happily agreed. So they decided to change their profit sharing ratio 1:2 with immediate effect. On that date revaluation of assets and reassessment of liability was carried out that resulted into a gain of Rs. 18,000. On that day at the Goodwill of the firm was valued at Rs. 1,20,000.
Based on the above information you are required to answer the following questions.

Question. sacrificing ratio equal to:
(A) Old ratio minus new ratio
(B)New share minus old share
(C) Old share plus new share
(D) Old share

Question.at the time of change in profit sharing ratio gaining partner capital account is………….. ….and sacrificing partner is…………………… For the adjustment of goodwill
(A) Credited debited
(B) Debited credited
(C) Increased or decreased
(D) Decreased or increased

Question. sacrificing /gain of Bhavya and Naman will be
(A)Bhavya sacrifice 1/6 , Naman gains 1/6
(B) Bhavya gains 1/6 , Naman sacrifice 1/6
(C) Only Bhavya gains 1/6
(D) Only Naman sacrifice 1/6

Question.Pass the journal entry for adjustment of Goodwill.
(A) Naman’s Capital a/c Dr. 1,20,000
To Bhavya’s Capital a/c 1,20,000
(B) Bhavya’s Capital a/c Dr. 60,000
To Naman’s Capital a/c 60,000
(C) Naman’s Capital a/c Dr. 20,000
To Bhavya’s Capital a/c 20,000
(D) Naman’s Capital a/c Dr. 1,00,000
To Bhavya’s Capital a/c 1,00,000

Case Based Questions
I. Read the given extract and answer the following questions:
Sometimes the existing partners decide to change their profit sharing ratio. The change is necessitated dueto the change in capital contribution or because of inactive participation in management. As a result ofchange in profit sharing ratio, one or more of the existing partners may acquire extra share in profits at
the cost of one or more of other partners. In such a case, in order to maintain equity among the partners, itis necessary to make adjustments for goodwill, revaluation of assets and liabilities, reserves, accumulatedprofits and losses etc.

Question. State the ratio in which the partners share profits or losses on revaluation of assets and liabilities, whenthere is a change in profit sharing ratio amongst existing partners.
(a) Old Ratio
(b) Gaining Ratio
(c) New Ratio
(d) Sacrificing Ratio

Question. Which of the following will cause a change in profit-sharing ratio
(a) Change of Capitals of the Firm
(b) Change in Responsibilities of the partners
(c) Mutual Agreement
(d) Change in Profitability of a Firm

Question. X, Y and Z are in a partnership firm sharing profits in the ratio 4 : 3 : 1. The partners agreed to sharefuture profits in the ratio 5 : 4 : 3. Each partners’s gain or sacrifice due to change in ratio will be:

(a) X’s Sacrifice 2/24;Y’sSacrifice 1/24; Z’s Gain 3/24
(b) X’s Gain 2/24;Y’sGain 1/24; Z’s Sacrifice 3/24
(c) X’s Sacrifice 1/24;Y’sSacrifice 2/24; Z’s Gain 3/24
(d) X’s Sacrifice 2/24;Y’sGain 3/24; Z’s Sacrifice 1/24

Question. A, B and C are partners in a firm sharing profits in the ratio of 3 : 3 : 2. From 1st April 2021, they decided toshare profits equally. On that date following balances appeared in their books:
Investment Fluctuation                 Reserve `10,000
Investment (at cost)                     `2,00,000
It was agreed that investment be valued at `1,70,000
Calculate the amount of Revaluation A/c to be debited.
(a) `1,60,000
(b) `30,000
(c) `2,40,000
(d) `40,000

II. Read the given extract and answer the following questions:Goodwill means the ‘good-name’ or the reputation earned by a firm through the hardwork and honesty ofits owners. If a firm renders good service to the customers, the customers who feel satisfied will come again
and again and the firm will be able to earn more profits in future.Thus, goodwill is the value of the reputation of a firm which enables it to earn higher profits in comparisonto the normal profits earned by other firms in the same trade.

Question. Total assets of a firm including fictitious assets of `5,000 are `85,000. The net liabilities of the firm are`30,000. The normal rate of return is 10% and the average profits of the firm are `8,000. Calculate thegoodwill as per capitalisation of super profits.
(a) `20,000
(b) `30,000
(c) `25,000
(d) None of these

Question. The Goodwill of the firm is NOT affected by:
(a) Location of the firm
(b) Reputation of the firm
(c) Better customer service
(d) None of the above

Question. The profits earned by a business over the last 5 years are as follows: `12,000; `13,000; `14,000; `18,000 and`2,000 (loss). Based on 2 years’ purchase of the last 5 years’ profits, value of Goodwill will be:
(a) `23,600
(b) `22,000
(c) `1,10,000
(d) `1,18,000

Question. Avya, Divya and Kavya were equal partners. They decided to change the profit sharing ratio to 4 : 3 : 2.For this purpose the goodwill of the firm was valued at `90,000. The journal entry for the treatment ofGoodwill on change in profit sharing ratio will be: 

III. Read the given information and answer the following questions:P, Q and R were equal partners in a firm. From 1st April, 2020 they decided to change their profit andsharing ratio to 4 : 3 : 2. It was also decided that P, who was getting remuneration of `1,000 per month willnot get any remuneration henceforth.
They also decided to value the Goodwill of the firm at 150% of the average annual profits of the last threeyears, which were as follows:Year ended:
31st March, 2019 `17,000
31st March, 2020 `14,000
31st March, 2021 `28,800
On scrutiny of accounts the following errors were discovered:
(i) On 1st October, 2019, 2 Motorbikes costing `5,000 each were purchased and were wrongly debited to
Travelling Expenses. Depreciation on Motorbikes be charged @ 20% p.a. on written down value basis.
(ii) On 1st January, 2019 a fire broke out which resulted into a loss of goods of `20,000. A claim of `75%
was received from the insurance company.
(iii) The closing stock for the year ending on 31st March 2020 was over-valued by `3,000.

Question.Calculate the adjusted profits of the firm.
(a) `22,000, `20,000, `30,000
(b) `17,000, `14,000, `28,800
(c) `22,000, `24,000, `27,000
(d) None of the above

Question.What will be the value of firm’s goodwill?
(a) `20,000
(b) `22,000
(c) `24,000
(d) `36,000

Question. Calculate the Depreciation on motorbikes for the years 2020 and 2021.
(a) `2,000 and `2,000
(b) `1,000 and `1,800
(c) `2,000 and `3,600
(d) None of the above

Question.Give the Journal entry for Goodwill.
(a) Dr. A’s Capital A/c `4,000; Cr. C’s Capital A/c `4,000
(b) Dr. B’s Capital A/c `2,000; Cr. A’s Capital A/c `2,000
(c) Dr. A’s Capital A/c `4,000; Cr. B’s Capital A/c `4,000
(d) Dr. B’s Capital A/c `4,000; Cr. C’s Capital A/c `4,000

Question.Read the given information and answer the following questions:
Raka, Seema and Mahesh were partners sharing profits and losses in the ratio of 5 : 3 : 2. With effect from1st April, 2020, they mutually agreed to share profits and losses in the ratio of 2 : 2 : 1. On that date, therewas a workmen’s compensation fund of `90,000 in the books of the firm. It was agreed that:
(i) Goodwill of the firm be valued at `70,000.
(ii) Claim for workmen’s compensation amounted to `40,000.
(iii) Profit on revaluation of assets and re-assessment of liabilities amounted to `40,000. 

Question.Write the amount of surplus of Workmen’s Compensation Reserve transfered to Partners’ Capital Accounts.
(a) `25,000; `15,000; `10,000
(b) `20,000; `20,000; `10,000
(c) `5,000; `5,000
(d) None of the above

Question.Calculate the amounts of profit on Revaluation to be distributed among old partners.
(a) `16000; `16000; `8,000
(b) `8,000; `8,000; `24,000
(c) `4,000; `4,000; `32,000
(d) `20,000; `12,000; `8,000

Question.What is the Sacrificing/Gaining Ratio of Partners?
(a) 1/20(Rak(a); -/20(Seem(a)
(b)1/10/Rak(a);1/10(Seem(a)
(c) -2/5(Rak(a));2/5 (Seem(a)
(d) None of the above

IV. Read the given information and answer the following questions:
P, Q and R are partners sharing profits and losses in the ratio of 3 : 3 : 2. Their balance sheet as at 31st March
2021 was as follows:
Partners decided that with effect from 1st April 2021 they would share profits and losses in the ratio of
4 : 3 : 2. It was agreed that:
(i) Stock be valued at `1,10,000.
(ii) Machinery is to be depreciated by 10%.
(iii) A provision for doubtful debts is to be made on debtors @ 5%.
(iv) Building to be appreciated by 20%.
(v) A liability for `2,500 included in sundry creditors is not likely to arise.
Partners agreed that the revised values are to be recorded in the books. They do not, however want todistribute the General Reserve.  !VQUE

Question.Find the missing values of A, B and C.
(a) `10537.5; `10537.5, `7025
(b) `15900; `10,000; `2,200
(c) `9367; `9369; `9366
(d) `10,000; `15,900; `2,200

Question.Find the missing values of F, G and H.
(a) `6,400; `4,800; `3,200
(b) `5,400; `5,400; `3,600
(c) `4,800; `4,800, `4,800
(d) `5,760, `4,320; `4,320

Question.Find the missing values of D and E.
(a) `21,000; `21,500
(b) `16,000; `26,500
(c) `2,000; `500
(d) `40,000; `2,500

Question. Find the missing values of I, J and K.
(a) `2,500; `1,500; `1,000
(b) `36,000; `21,600; `14,400
(c) `36,000; `18,000; `18,000
(d) `2,500; `1,000; `1,500

Read the following information carefully and answer the questions that follow:X and Y are partners in 3:2. Their capital balances as on 1st April 2020 amounting to ₹2,00,000 each. On 1st February, 2021, X contributed an additional capital of ₹1,00,000. Following are the terms of deed:
(a) Interest on capital @ 6% per annum
(b) Interest on drawings @ 8% per annum
(c) Salary to X ₹1500 per month
(d) Commission to Y
@10% on net profit after charging interest on capital, salary and his commission. Drawings of the partners were ₹20,000 and ₹30,000 respectively during the year. Net profit earned bythe firm was ₹2,08,000.

Question. What is the amount of interest on drawings of X and Y:
(a) ₹ 1200 and ₹ 1800 respectively
(b) ₹ 800 and ₹ 1200 respectively
(c) ₹ 1200 and ₹ 800 respectively
(d) ₹ 1600 ₹ 2400 respectively

Question. What is X’s share in the net divisible profit?
(a) ₹ 124400
(b) ₹ 83600
(c) ₹ 91200
(d) ₹ 60800

Question. What is the amount of commission payable to Y?
(a) ₹ 15000
(b) ₹ 16500
(c) ₹ 20800
(d) None of these

Question. What is the amount of Interest on capitals of X and Y:
(a) ₹12,000 each
(b) ₹12,000 to X and ₹ ₹13,000 to Y
(c) ₹13,000 to X and ₹12,000 to Y
(d) None of the above.

Question. What will be the closing capital of X after all adjustments
(a) ₹ 422200
(b) ₹ 401400
(c) ₹ 300000
(d) ₹ 423000

Read the following information carefully and answer the questions that follow:
A, B and C were partners sharing profits in the ratio of 1:2:3. Their fixed capitals on 1st April, 2020 were: A ₹3,00,000; B ₹4,50,000 and C ₹10,00,000. Their partnership deed provided the following: i. A provides his personal office to the firm for business use charging yearly rent of ₹1,50,000.
ii. Interest on capitals @8% p.a. and interest on drawings @ 10% p.a.
iii. A was allowed a salary @ 10,000 per month.
iv. B was allowed a commission of 10% of net profit as shown by Profit and Loss account, after charging such commission.
v. C was guaranteed a profit of ₹3,00,000 after making all adjustments.
The net profit for the year ended 31st march, 2021 was ₹10,30,000 before making above adjustments. You are informed that A has withdrawn ₹5,000 in the beginning of each month, B has withdrawn ₹5,000 at the end of each month and C has withdrawn ₹ 24,000 in the beginning of each quarter.
Choose the correct option based on the above information:

Question. Net profit for the year is:
(a) ₹10,30,000
(b) ₹11,80,000
(c) ₹7,30,000
(d) ₹8,80,000

Question. What will be the total interest on drawings?
(a) ₹24,000
(b) ₹12,000
(c) ₹36,000
(d) 48,000.

Question. What will be the divisible profit?
(a) ₹5,56,000
(b) ₹5,50,000
(c) ₹5,52,000
(d) ₹5,53,000.

Question.What will be the commission of B?
(a) ₹8,00,000
(b) ₹96,000
(c) ₹80,000
(d) ₹72,000.

Question.A’s rent will be shown in:
(a) Profit and loss account
(b) Profit and Loss Appropriation account
(c) A’s Capital account
(d) None of the above.