Partnership

Admission

Easy

Read the passage carefully and answer the next 5 questions

The books of a business showed that the firm's capital employed on December 31, 2024, Rs. 5,00,000 and the profits for the last five years were: 2020-Rs. 40,000; 2021-Rs. 50,000; 2022-Rs. 55,000; 2023- Rs.70,000 and 2024-Rs. 85,000. You are required to find out the value of goodwill based on 2 years purchase of the super profits of the business, given that the normal rate of return is 10%.

In case normal profit is Rs 60,000 then what will be the normal rate of return?

12%

15%

10%

14%

✅ Correct Option: 1

Given information:

Capital Employed = Rs. 5,00,000
Normal Profit = Rs. 60,000

The relationship between Normal Profit, Capital Employed, and Normal Rate of Return is:

Normal Profit = Capital Employed × $\frac{\text{Normal Rate of Return}}{100}$

Rearranging to find Normal Rate of Return:

Normal Rate of Return = $\frac{\text{Normal Profit}}{\text{Capital Employed}}$ × 100

Substituting the values:

Normal Rate of Return = $\frac{60,000}{5,00,000}$ × 100

Normal Rate of Return = 0.12 × 100 = 12%

The normal rate of return is 12% when normal profit is Rs. 60,000 on a capital employed of Rs. 5,00,000.

Correct Option: 1 (12%)

2025: 30 May Shift 2

The minimum guaranteed amount shall be paid to the new partner when his share of profit as per the profit sharing ratio:

2025: 27 May Shift 2

Identify the steps involved in calculating goodwill under the capitalization of super profits method:

(A) Calculate capital of the firm, which is equal to total assets (excluding goodwill and fictitious assets) minus outside liabilities

(B) Multiply the super profits by the required rate of return multiplier

(D) Calculate super profits by deducting normal profits from average profits

(E) Calculate average profit for past years

Choose the correct answer from the options given below:

2025: 15 May Shift 2

If a new partner does not bring his share of goodwill in cash, the following treatment shall be made

2026: 11 May Shift 2

"At the time of admission of a partner, provision for doubtful debts is found to be in excess."

Record this in the books of the firm.

2026: 12 May Shift 1

In case of admission of a partner, Match List-I with List-II.

List-I	List-II
(A) For Unrecorded Liability	(I) Revaluation A/c Dr. To Asset A/c
(B) For Over-Valuation of Asset	(II) Partners' Capital A/c Dr. To Revaluation A/c
(C) For transferring loss on revaluation	(III) Revaluation A/c Dr. To Liability A/c
(D) For Under-Valuation of Asset	(IV) Asset A/c Dr. To Revaluation A/c

Choose the correct answer from the options given below:

2025: 30 May Shift 2

A, B and C are partners in a firm. If D is admitted as a new partner then:

In case normal profit is Rs 60,000 then what will be the normal rate of return?

Solution

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