F.Y B.COM
SEMESTER - 2
FINANCIAL ACCOUNTING
(FA)
MCQS - SALE AND CONVERSION OF PARTNERSHIP FIRM
SALE AND CONVERSION OF PARTNERSHIP FIRM
1. Business assets and liabilities are to be transferred to 'Realisation Account-
(a) at their market values
(b) at their cost
(c) at their replacement values
(d) at their arbitrary values
2. Credit balance of Profit and Loss Account and General Reserve are to be transferred to:
(a) Realisation Account
(b) New Company's Account
(c) Partners' Capital Accounts
(d) Cash/Bank Account
3. 1/5th of 10,000 Equity Shares of Rs.10 each, received by a partnership firm against purchase consideration, has been sold in the market at Rs. 12 per share.The profit to be credited to 'Realisation Account' would amount to-
(a) Rs. 4,000
(b) Rs. 5,000
(c) Rs. 6,000
(d) Rs. 3,000
4. The following values appeared in the books of a firm: Fixed Assets Rs. 20,000, Investments Rs. 7,000, Stock Rs. 6,000, Debtors Rs. 5,000, Bank balance Rs. 3,000, Reserve Fund Rs. 4,000, Creditors Rs. 6,000, Bills Payable Rs, 1,000. Determine the purchase price of the business subject to the following conditions: Fixed Assets and Stock are to be taken at their book values; Investments to be taken at Rs. 9,000 and
Debtors at a provision of 10% for bad debts; Bank balance is not to be transferred but all liablities are to be taken over -
(a) Rs. 30,500
(b) Rs. 31,500
(c) Rs. 33,500
(d) Rs. 32,500
5. Amount determined as payable by a new company on conversion of a partnership firm is known as:
(a) Contract Price
(b) Purchase Price
(c) Sales Price
(d) Cost Price
6. The balance sheet of a partnership firm disclosed net debtors of Rs. 96,000 (after considering bad debts reserve of Rs. 4,000). On conversion of the firm into a company, the debtors are to be taken over at 10% less. The debtors amount considered while determining the purchase consideration would have been:
(a) Rs. 88,000
(b) Rs. 87,000
(c) Rs. 86,000
(d) Rs. 89,000
7. The balance sheet of a partnership firm disclosed Debtors and Bad-debts Reserve at Rs. 40,000 and Rs. 4,000 respectively. On conversion of the firm into a company, debtors are taken over at 10% less. What would be debtors value for such determination of net assets?
(a) Rs. 32,000
(b) Rs. 32,400
(c) Rs. 36,400
(d) Rs. 34,000
8. Profit of Realisation Account is transferred to Partners' Capital Accounts:
(a) To be credited in equal proportion
(b) To be credited in the proportion of opening capital balances
(c) To be credited in profit and loss sharing ratio
(d) To be credited as per the provision of the Partnership Act.
9. Which of the following assets, with reference to the classification of diferent assets, is a fictitious asset?
(a) Land and Building
(b) Profit and Loss Account (debit balance)
(c) Loose tools
(d) Investments
10. Determine the correct alternative, after taking into consideration, based. on the following details of net assets on conversion of a partnership firm into a company: Fixed Assets Rs.1,00,000, Creditors Rs. 25,000, Stock Rs. 31,500, Debtors Rs. 10,000, General Reserve Rs. 12,500, Depreciation Fund (Machinery) Rs. 25,000. Market value of Fixed Assets is 20% more than its book value, while stock's values 10% less than its book value.
(a) Rs. 1,15,000
(b) Rs. 1,39,650
(c) Rs. 1,40,000
(d) Rs. 1,10,000
11. The purchase consideration (determined on conversion of a partnership firm into a company) is Rs. 4,00,000. The purchasing company settles it by allotting 32,000 Equity Shares of Rs. 10 each at Rs. 11 per share, 15% Debentures of Rs. 10 at a discount of 15% and the balance in cash. Cash paid in this regard would be:
(a) Rs. 12,000
(b) Rs. 13,000
(c) Rs. 14,000
(d) Rs. 15,000
12. The instruction is not given about to distribute the shares or debentures received as purchase consideration among the partners, How it should be distributed ?
(a) In closing capital ratio
(b) In P & L ratio
(c) As per accounts
(d) Equal ratio
13. A company has borne and a firm has paid dissolution expences of Rs. 2,000, due to conversion of partnership into a company. If the net assets of the business is of Rs.3,23,000. find the purchase consideration of the business.
(a) Rs.3,21,000
(b) Rs.3,27,000
(c) Rs.3,25,000
(d) Rs.3,23,000
14. When purchase consideration is fixed by totalli ang of company's Equity shares, Pref. shares, Debentures, Cash etc. Which method is used for this kind of purchase consideration ?
(a) Net assets method
(b) Sales method
(c) Consideration method
(d) Lumpsum method
15. If in a question the information is given that the dissolution or conversion expenses will be borne and paid by the business purchase, than what entry should be passed in the books of partnership firm for it ?
(a) Debited to New Co. A/c by crediting Realisation A/c
(b) Debited to realisation A/c by crediting Partners capital A/c.
(c) Debited to realisation A/c by crediting Cash-bank A/c
(d) This transaction will not be recorded in the books of the partnership firm
16. How many numbers of partners and what types of their liabilities have been in a general partnership excluding banking partnership ?
(a) No.of members are 30 and their liabilities are limited
(b) No.of members are 20 and their liabilities are undinited
(c) No.of members are 10 and their liabilities are only for monetary matters
(d) None of these answers
17. According to accounting point of view what is called the amount which is received by firm at the time of conversion of partnership firm into company ?
(a) Purchase Consideration
(b) Price of Conversion
(c) Purchase cost
(d) None of these answers
18. By considering the calculation matter of purchase consideration, which of the following two methods are used to determine purchase consideration?
(a) Amount method and lumsum method
(b) Sales method and Purchase method
(c) Consideration method and Net Assets method
(d) None of these answers
19. By fixing purchase consideration, which of the following is deducted from the assets, when using net asset method ?
(a) Liabilities and dues
(b) Goodwill
(c) Capital and Reserves
(d) None of these answers
20. When purchase consideration is fixed by totalling of company's equity shares amont of Preference share amount, Debentures, cash or Bank etc; what method is known for this kind of PC?
(a) Sales method
(b) Consideration method
(c) Net assets method
(d) None of these answers
21. Give the full form of PC means purchase price of business?
(a) Purchase consideration
(b) Purchase cost
(c) Price condition
(d) None of these answers
22. If purchase consideration less Net asset then the amount of difference should be recognised as-
(a) Capital Reserve
(b) Goodwill
(c) Liabilities
(d) None of this
23. IF the purchase consideration is paid less than the amount of net assets, then the amount of difference should be recognized as -
(a) Capital Reserve
(b) Gain to firm who sales the business
(c) Goodwill
(d) None of these answers
24. In the books of Partnership firm the direct Accounting entry for the amount arised as goodwill or capital reserve is
(a) made
(b) not made for goodwill
(c) made only for capital reserve
(d) not made
25. Intangible assets are not considered as the assets, while totalling net assets. This statement is _________.
(A) true
(b) false
(c) true in certain cases or false in certain cases
(d) None of these answers
26. When amount of Advertisement suspense account is given in the Balance sheet of partnership firm whether the same amount is included in assets, while totalling for Net assets or not ? Why?
(a) lt is not included, because it is known as fictitious assets
(b) It is included, because it is an asset
(c) It should be included, if it is not shown on Balance sheet of Partnership firm
(d) None of these answers
27. Which price is to be considered in the case of market value or new value of depreciable assets is not given?
(a) Price, after deducting assets depreciation
(b) Cost value of assets
(c) Price including amount of asset's depreciation
(d) None of these answers
28. At the time of calculating net assets if any new value or revaluation value of any assets. is remain valid, the same is considered for totaling the assets, then whether any amount such as its fund, reserve or provision is deducted from the amount of total assets or not? OR whether the same is to be included in the amount of total liabilities or not?
(a) It is deducted from the amount of assets, and added into amount of liabilities.
(b) It is not deducted from the amount of assets and also not added into liabilities.
(c) It is not deducted from the amount of assets but also treated as Liabilities.
(d) None of these answers
29. While calculating net assets, whether the amount of "Worksmen's profit sharing fund" is considered for totaling of liabilities or not?
(a) Yes, (it is considered)
(b) No, (it is not considered)
(c) It is considered if instructed
(d) None of these answers
30. While totalling of liabilities of partnership firm the amount of worker's accident compensation fund is treated as, and it is _________ for totalling of liabilities.
(a) Liabilities, considered
(b) Ownership, considered
(c) Ownership in the absence of any responsibility claim not considered
(d) None of these answers
31. Which of the following amount is treated as "Owner's fund".?
(a) Workers' Saving Accounts
(b) Reserve fund
(c) Loan of partner
(d) None of these answer
32. At the time of conversion of partnership firm into company, if the amount of purchase consideration (PC) is fixed by considering amounts of assets and liabilities taken over by purchaser, (or purchasing company) then this (PC) is fixed by the _________ method.
(a) Net assets
(b) Consideration
(c) Lumpsum
(d) Net Liabilities
33. If any one amount out of share, debenture and cash is not given in question or any one Word out of "remaining cash" (or "balance in cash"), "remaining Bank", "remaining share", "remaining debenture" are given at the time of conversion, then the purchase consideration always determines by _______ method.
(a) Consideration
(b) Net assets
(c) Lumpsum
(d) None the these
34. Which enteries are to be passed by the Partnership firm to close the accounts of assets and liabilities at the time of conversion of partnership firm into company.
(a) Assets and liabilities are credited to realisation A/c.
(b)Assets and Liabilities are debited to realisation A/c
(c) Assets are debited to realisation account and liabilities are credited to realisation A/c
(d) None of these answers
35. Which details of Accounts' Balances are not shown on realisation account?.
(a) Account balances of fixed and current assets.
(b) Special Reserve or provision Account balances.
(c) Balances of Reserves and surplus
(d) Non of these answers
36. Out of the following which entry has been shown for distribution of reserve and profit balances among the partners of firm?
(a) These amounts are credited to realisation account in Profit & Loss ratio.
(b) These amounts are credited to capital accounts in P & L ratio
(c) These amounts are debited to capital accounts of partners in capital ratio.
(d) None of these answers
37. Out of the following which journal entry is passed for PC of business in the books of firm, for conversion scheme ?
(a) Debited to business purchase A/c by crediting New Co.s A/c
(b) Debited to New Co's A/c by crediting Realisation A/c
(c) Debited to cash A/c by crediting business purchase A/c
(d) None of these answers
38. Out of which journal entry is passed when the partnership firm receives the consideration of PC?
(a) Debited to such consideration A/c by crediting New Co.'s A/c
(b) Debited to New Co's A/c by crediting such consideration A/c
(c) Debited to Realisation A/c by crediting New Co.s A/c
(d) Debited to cash A/c by crediting Realisation A/c
39. If partnership firm sells assets which is not takenover by the new Co., the fim will debit Cash/Bank account and in the case of any Partner takes such assets then debit such partner's capital A/c, but in both circumstances which of the follwing account is credited ?
(a) Such capital A/c
(b) New Co's A/c
(c) Realisation A/c
(d) None of these answers
40. If partnership firm pays liabilities which is not takenover by the new co., the fim willdebit it to realisation A/c or if it is paid by any partner of the firm it is also debited to realisation accounts; but in both circumstances which of the following another entry has been passed?
(a) If firm pays such liability then it is credited to cash/bank Alc., and if any partner pays such liability then it is credited to his / hej capital A/c.
(b) Cash / Bank A/c is credited in any circumstans.
(c) Capital A/cs of partners are credited in any circumistances
(d) None of these answers
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