Changes to Partnerships

X and Y are in partnership. Z was admitted to the partnership on 1 July 2018.

It was also agreed that at that date:

1 Assets of the partnership would be valued upwards by $48 000.

2 Value of goodwill would be $20 000, but no goodwill account would be retained in

the books of account.

3 Z would introduce $80 000 cash.

4 Profit and loss sharing ratio would be X, Y and Z, 2 : 1 : 1 respectively.

What was Z’s capital account balance immediately after the admission?

• $63 000

• $75 000

• $87 000

• $97 000

P and Q are in partnership. R was admitted as a partner on 1 July 2018, and the profit and loss

sharing ratio among P, Q and R was 2 : 2 : 1 respectively.

For the purpose of R’s admission, the partners agreed:

goodwill would be valued at $20 000, but not retained in the books of account

R would introduce cash, $40 000, and motor vehicle, $10 000

R would be entitled to an annual salary, $5000.

What was R’s capital account balance immediately after his admission?

• $36 000

• $46 000

• $51 000

• $51 000

L, M and N are in partnership sharing profits and losses equally.

L retired when the credit balances on her capital and current accounts were $100 000 and

$40 000.

Partnership assets were revalued upwards by $60 000.

L took half of the amount due to her on retirement. The other half was left as a loan to the business.

How much was L paid from the partnership bank account on her retirement?

• $20 000

• $40 000

• $60 000

• $80 000

Alice and Bharti have been in partnership sharing profits and losses in the ratio of 3 : 2. The balances on the partners’ capital accounts at 31 December 2018 are shown.

Alice $32000

Bharti $18000

The partners decided to share profits and losses equally with effect from 1 January 2019. There

was no goodwill account in the books. Goodwill is valued at $30 000 and is not to be retained in

the books of account.

What is the balance on Alice’s capital account after the adjustment for goodwill?

• $15 000

• $18 000

• $35 000

• $50 000

X and Y had been in partnership sharing profits and losses equally.

On 1 July 2018, Z was admitted as partner and the three partners shared profits and losses

equally.

On that date assets were revalued and there was a profit on revaluation, $36 000.

What were the accounting entries to record the profit on revaluation?

• credit X current account $18 000, credit Y current account $18 000

• credit X current account $12 000, credit Y current account $12 000, credit Z current account $12 000

• credit X capital account $18 000, credit Y capital account $18 000

• credit X capital account $12 000, credit Y capital account $12 000, credit Z capital account $12 000

Goodwill is adjusted in partners’ accounts when there is a change in the profit sharing ratio.

How is this recorded?

• debit capital accounts in new profit sharing ratio

  credit capital accounts in old profit sharing ratio

• debit capital accounts in old profit sharing ratio

  credit capital accounts in new profit sharing ratio

• debit current accounts in new profit sharing ratio

  credit current accounts in old profit sharing ratio

• debit current accounts in old profit sharing ratio

  credit current accounts in new profit sharing ratio

X, Y and Z were in partnership sharing profits and losses in the ratio 5 : 3 : 2 respectively.

The capital account balances before any adjustments were $40 000, $30 000 and $20 000

respectively.

Z retired from the partnership. X and Y continued in partnership, sharing the profits and losses in

the ratio 3 : 2 respectively.

Net assets were to be revalued upwards by $10000.

What was the capital account balance for partner X following Z’s retirement?

• $35 000

• $39 000

• $41 000

• $45 000

L and M are business partners sharing profits and losses in the ratio 2 : 1.

On 31 December 2018, their capital and current accounts showed the following credit balances.

L

$

M

$

capital account L $200 000 M $100 000

current account L $40 000 M $30 000

At 1 January 2019, M transferred his private motor vehicle to the partnership. This motor vehicle

originally cost $15 000. Its current market value is $8000.

Both partners made drawings of $20 000 each.

What was the total of each partner’s capital and current accounts after the changes?

• A

• B

• C

• D