Case Study Accountancy Class 12
Admission of Partner
Case Study
Read the following hypothetical text and answer the given questions on the basis of the same: Sterling enterprises is a partnership business with Ryan, Williams and Sania as partners engaged in the production and sales of electrical items and equipment.
Their capital contributions were Rs.50,00,000, Rs.50,00,000 and Rs.80,00,000 respectively with the profit- sharing ratio of 5:5:8.
As they are now looking forward to expanding their business, it was decided that they would bring in sufficient cash to double their respective capitals. This was duly followed by Ryan and Williams but due to unavoidable reasons Sania could not do so and ultimately it was agreed that to bridge the shortfall in the required capital a new partner should be admitted who would bring in the amount that Sania could not bring and that the new partner would get share of profits equal to half of Sania’s share which would be sacrificed by Sania only.
Consequent to this agreement Ejaz was admitted and he brought in the required capital and Rs.30,00,000 as premium for goodwill.
Based on the above information you are required to answer the following questions. Question 1:
What will be the new profit-sharing ratio of Ryan, Williams, Sania and Ejaz?
(a) 1:1:1:1
(b) 5:5:8:8
(c) 5:5:4:4
(d) None of the above
Answer: ( c) 5:5:4:4
Explanation: ................. it was agreed that to bridge the shortfall in the required capital a new partner should be admitted who would bring in the amount that Sania could not bring and that the new partner would get share of profits equal to half of Sania’s share which would be sacrificed by Sania only.
(Sania's Share is 8/18 and half of that will be 4/18)
Question 2:
What is the amount of capital brought in by the new partner Ejaz?
(a) Rs.50,00,000
(b) Rs.80,00,000
(c) Rs.40,00,000
(d) Rs.30,00,000
Answer: (b) Rs.80,00,000
Explanation: ................. it was agreed that to bridge the shortfall in the required capital a new partner should be admitted who would bring in the amount that Sania could not bring and that the new partner would get share of profits equal to half of Sania’s share which would be sacrificed by Sania only.
(Sania's additional capital were 80,00,000 which were brought by Ejaz)
Question 3:
What is the value of the goodwill of the firm?
(a) Rs.1,35,00,000
(b) Rs.30,00,000
(c) Rs.1,50,00,000
(d) Cannot be determined from the given data.
Answer: (a) Rs.1,35,00,000
Explanation: ( 30,00,000 X 18/4 = 1,35,00,000)
Question 4:
What will be the correct journal entry for the distribution of Premium for Goodwill brought in by Ejaz?
(a) Ejaz Capital A/c ……………...Dr. 30,00,000
To Sania’s Capital A/c 30,00,000
(Being…………………………..)
(b) Premium for Goodwill A/c……Dr. 30,00,000
To Sania’s Capital A/c 30,00,000
(Being…………………………..)
(c) Premium for Goodwill A/c……Dr 30,00,000
To Reyan’s Capital A/c 8,33,333
To William’s Capital A/c 8,33,333
To Ejaz’s Capital A/c 13,33,333
(Being…………………………..)
(d) Premium for Goodwill A/c……Dr 30,00,000
To Reyan’s Capital A/c 10,00,000
To William’s Capital A/c 10,00,000
To Ejaz’s Capital A/c 10,00,000
(Being…………………………..)
Answer: (b) Premium for Goodwill A/c……Dr. 30,00,000
To Sania’s Capital A/c 30,00,000
Explanation:
accounting case study examples with solutions
Dear Readers, Here we have provided the Case study of Accountancy from Chapter Admission of Partner. Stay tuned for the following also:
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