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X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2018, they decided to share profits and losses equally. The profit and loss account showed a debit balance of ₹10,000. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill should be valued at two years' purchase of the average profit of the preceding five yea₹ The profits and losses of the preceding years ended 31st March, are:

Year 2013-14 2014-15 2015-16 2016-17 2017-18
Profits (₹) 70,000 85,000 45,000 35,000 10,000 (Loss)

Answer the following questions:

i. Change in the existing agreement of profit sharing ratio is considered as 

(a) Reconstitution of a partnership firm 

(b) Revaluation of a partnership firm 

(c) Dissolution of a partnership firm 

(d) None of the above

ii. State the ratio in which the partners share the accumulated profits when there is a change in the profit sharing ratio amongst existing partne₹ 

(a) Old ratio 

(b) New ratio 

(c) Equal ratio 

(d) Sacrificing ratio

iii. How is the sacrificing ratio determined? 

(a) Old ratio – New ratio 

(b) New ratio – old ratio 

(c) Old ratio + New ratio 

(d) None of the above

iv. What is the amount of Goodwill credited to X Capital A/c? 

(a) ₹ 15,000 

(b) ₹ 90,000 

(c) ₹ 12,000 

(d) ₹ 3,000

1 Answer

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Best answer

i. (a) Reconstitution of a partnership firm

ii. (a) Old ratio

iii. (a) Old ratio – New ratio

iv. (a) ₹ 15,000

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