When Goodwill Exist in the Business

Q.

Examples of short-term provisions and long-term provisions?

Q. Goodwill already appearing in the books is written off by debiting all the partners’ capital account in the .

1. new ratio
2. old ratio
3. gaining ratio
4. sacrificing ratio

Q.

On retirement, the capital account of the retiring partner shall be credited with ……….

1. goodwill of the firm

2. None of the above

3. share of goodwill of remaining partners

4. his share of goodwill

Q.

Hari, Ravi and Kavi were partners in afirm sharing profits and losses in the ratio of 3:2:1. They admitted Guru as a new partner for 1/7th share in the profits. The new profit sharing ratio will be 2:2:2:1, respectively. Guru brought Rs. 3, 00, 000 for his capital and Rs. 45, 000 for his share of goodwill. Pass necessary Journal entries in the books of the firm.

Q.

Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4 : 3 : 2. On Hari's admission, goodwill of the firm is valued at Rs. 36, 000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari's admission.

Q.

Goodwill is recorded in the books only when it is …………. and the goodwill account cannot be raised on its own.

1. None of the above

2. Raised

3. Purchased

4. Self generated

Q.

Goodwill already appearing in balance sheet is distributed among old partners in ______ ratio.

1. gaining

2. new

3. old

4. sacrificing

Q.

State Bank of India issued 20, 000, $6\%$ Debentures of Rs 50 each at a premium of $8\%$ on June 30, 2010 redeemable on June 30, 2018. The issue was fully subscribed. Record necessary entries for issue and redemption of debentures.

Q.

While adjusting for goodwill, ___________ partners' capital account is debited and ___________ partners' capital account is credited.

1. gaining, sacrificing

2. sacrificing, gaining

3. old, new

4. old, remaining

Q.

Arti and Bharti are partners in a firm sharing profits in 3 : 2 ratio. They admitted Sarthi for $\frac{1}{4}$ share in the profits of the firm. Sarthi brings Rs.50, 000 for his capital and Rs. 10, 000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs.5, 000. The new profit sharing ratio between Arti, Bharti and Sarthi will be 2 : 1: 1. Record the necessary journal entries in the books of the new firm.

Q.

Goodwill is written off by debiting all the partners’ capital account in the ___

1. None of the above

2. Old Ratio

3. Gaining Ratio

4. Sacrificing ratio

Q.

Journalise the following transactions regarding realisation expenses

(a) Realisation expenses amounted to Rs. 2, 500.

(b) Realisation expenses amounted to Rs. 3, 000 were paid by Ashok, one of the partners.

(c) Realisation expenses Rs. 2, 300 borne by Tarun, personally.

(d) Amit, a partner was appointed to realize the assets, at a cost of Rs. 4, 000.

The actual amount of realisation amounted to Rs. 3, 000.

Q.

On 1st April, 2017, Adi Shakti Maa Ltd. was formed with an authorised capital of Rs 10, 00, 000 divided into 1, 00, 000 equity share of Rs 10 each. The company issued prospectus inviting applications for 90, 000 equity shares. The company received applications for 85, 000 equity shares. During the first year Rs 8 per share were called. Ram holding 1, 000 shares and Shyam holding 2, 000 shares did not pay the first call of Rs 2 per share. Shyam's shares were forfeited after the first call and later on 1, 500 of the forfeited shares were re-issued at Rs 6 per share, Rs 8 called up. Show how Share Capital in the Balance Sheet of the company as per Revised Schedule III, Part I of the Companies Act, 2013 is to be presented.

Q.

Is goodwill good or bad?

Q.

Verma and Sharma are partners in a firm sharing, profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for $\frac{1}{5}$ share of profits. Ghosh is to bring in Rs. 20, 000 as captial and Rs. 4, 000 as his share of goodwill premium. Give the necessary journal entries

(a) When the amount of goodwill is retained in the new business.

(b) When the amount of goodwill is fully withdrawn.

(c) When 50% of the amount of goodwill is withdrawn.

(d) When goodwill is paid privately.

Q.

If at the time of retirement of a partner, goodwill appears in the balance sheet of the firm, it will be written-off by debiting the capital accounts of ______

1. None of the above

2. All partners

3. Remaining partners

4. Outgoing partner

Q. Verma and Sharma are partners in a firm sharing profits and losses in the ratio of $5:3$. They admitted Ghosh as a new partner for $1/5^{th}$ share of profits. Ghosh is to bring in $Rs.20,000$ as capital and $Rs.4,000$ as his share of goodwill premium. Give the necessary Journal entries, when goodwill is paid privately.

1. No entry is required.
2. Cash A/c Dr. 4000
   To Goodwill A/c 4000
3. Goodwill A/c Dr. 4000
   To Cash A/c 4000
4. Goodwill A/c Dr. 4000
   To Verma's Caital A/c 2500
   To Sharma's Capital A/c 1500

Q.

Goods given as charity should be credited to:

1. Charity account

2. Trading account

3. Sales account

4. Purchase account

Q.

Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3 : 2 : 1. Manisha retires and goodwill of the firm is valued at Rs.1, 80, 000. Aparna and Sonia decided to share future profits in the ratio of 3 : 2. Pass necessary journal entries.

Q. The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of $2:3$ as at ${31}^{st}$March, 2016 is given below:

Liabilities	(Rs.)	Assets	(Rs.)
Madhu's Capital Vidhi's Capital General Reserve Bills Payable	5, 20, 000 3, 00, 000 30, 000 1, 50, 000	Land and Building Machinery Stock Debtors 3, 00, 000 Less: Provision (10, 000) Bank	3, 00, 000 2, 80, 000 80, 000 2, 90, 000 50, 000
	10, 00, 000		10, 00, 000

Madhu and Vidhi decided to admit Gayatri as a new partner from $1^{st}$April, 2016 and their new profit-sharing ratio will be $2:3:5$. Gayatri brought $Rs.4,00,000$ as her share of goodwill premium in cash.
(a) Goodwill of the firm was valued at $Rs.3,00,000$.
(b) Land and Building was found undervalued by $Rs.26,000$.
(c) Provision for doubtful debts was to be made equal to $5\%$ of the debtors.
(d) There was a claim of $Rs.6,000$ on account of workmen compensation.
Prepare Revaluation Account, Partners Capital Account and the Balance Sheet of the reconstituted firm.

Q.

Mohanlal, Girdharilal and Shyamlal are partners sharing profits in the ratio of 4:3:1. Shyamlal retires from the firm. On Shyamlal’s retirement, goodwill has been valued at Rs. 52, 000. There was a goodwill account already appearing in the books of the firm with a value of Rs. 60, 000. By what amount will Mohanlal`s capital account be debited with?

1. Rs 8000

2. None of the above

3. It shall not be debited

4. Rs 4000

Q.

RR Ltd. decided to set up a manufacturing unit in the rural area of Jharkhand where people have few job opportunities. Prepare a comparative Balance Sheet of RR Ltd.

$\begin{array}{ccc}\text{Particulars}& \text{31st March, 2016}& \text{31st March, 2017}\\ \text{Share Capital}& 2,00,000& 3,00,000\\ \text{Reserve and Surplus}& 50,000& 40,000\\ \text{Long Term Borrowings}& 4,20,000& 3,00,000\\ \text{Trade Payables}& 1,35,000& 1,50,000\\ \text{Tangible Assets}& 3,00,000& 2,00,000\\ \text{Inventory}& 3,00,000& 4,00,000\\ \text{Cash and Cash Equivalents}& 2,05,000& 1,90,000\end{array}$

Q. When we realise that the existing value of goodwill is no more valid than we debit the accounts and credit the goodwill account.

1. goodwill
2. partner's capital
3. partner's assets
4. partner's reserve

Q. Select the most appropriate answer from the alternatives given below :

If the goodwill is raised to the extent of retiring partners share ___________ account is to be debited.
a) cash
b) goodwill
c) all partner’s capital
d) retiring partners capital

Q. Select the most appropriate answer from the alternatives given below :

When goodwill is raised at its full value and it is written off __________ account is to be credited.
a) cash
b) goodwill
c) all partners capital account
d) loan

Q. When existing Goodwill is written off, is the partner's Capital Account debited or credited?

Q. Why is goodwill written off?

Q.

what happens to d old goodwill in case of retirement ?

Q. State 'True' or 'False'

When goodwill is written off, goodwill amount is debited.

Q. Objective type questions :
Answer in one sentence only.

How would you adjust retiring partner’s share of goodwill without opening goodwill account?