Read the following case study and answer question. Deepali, Nimisha and Sonam were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Nimisha retired and the new profit sharing ratio between Deepali and Sonam was 2 : 3. On Nimisha's retirement, the goodwill of the firm was valued at ₹ 1,20,000.
From the information provided in the case study, calculate Sonam’s sacrifice or gain:
4/10 Sacrifice
Sonam's old share: 3/10
New share: 2/10
Sacrifice = 3/10 - 2/10 = 4/10 (Sacrifice).
Important Questions from Accounting for Partnership : Goodwill
The journal entry for treatment of goodwill, when a new partner brings his share of goodwill in cash and one of the old partners gains, involves the following:
(A) Gaining Partner’s Capital Account is debited
(B) Premium for Goodwill Account is debited
(C) Sacrificing Partner’s Capital Account is credited
(D) Gaining Partner’s Capital Account is creditedChoose the correct answer from the options given below:
Identify the correct sequence to be followed while preparing the final account of a partnership firm:
(A) Profit and Loss Appropriation Account
(B) Profit and Loss Account
(C) Trading Account
(D) Balance Sheet
Choose the correct answer from the options given below:
Consider the following facts about valuation of Goodwill of a partnership firm:
A. Goodwill valuation is done on change in profit sharing ratio among the existing partners.
B. Goodwill is valued on admission of a partner, to know the amount to be paid by him to compensate sacrificing partner(s).
C. Goodwill valuation is done on the retirement of a partner to know the amount to be paid to him as compensation for his sacrifice.
D. Goodwill valuation is done at the time of dissolution of a firm which involves sale of business as a going concern.
E. Goodwill valuation is done during the distribution of profits of the partnership firm.
Choose the correct answer from the options given below:
In the context of a partnership firm, the need for valuation of goodwill arises in the following circumstances.
Arrange the following steps in the correct order to calculate the value of Goodwill by the super profit method.
A. Calculate Capital Employed
B. Calculate Average profit
C. Calculate Super profit
D. Calculate Normal profit
E. Calculate the value of Goodwill
Choose the correct answer from the options given below:
