Neco 2020 Financial Accounting Question 27

Practice objective / multiple choice question 27 from the 2020 Neco Financial Accounting examination.

Neco 2020 Financial Accounting Objective / Multiple Choice Hard Difficulty
Question 27 NECO • 2020 • FINANCIAL_ACCOUNTING • objective

Three partners A, B and C share profits in the ratio 3:2:1. Their capital balances are A \(120{,}000\), B \(80{,}000\) and C \(40{,}000\). Goodwill of the firm is valued at \(60{,}000\). A new partner D is admitted with a \(\frac{1}{4}\) share of future profits and pays cash equal to his share of goodwill. At the same time the firm revalues its building upward by \(30{,}000\) and its inventory downward by \(5{,}000\). The net revaluation surplus is allocated among the existing partners in their profit‑sharing ratio. Determine (i) the amount of cash D must pay on admission, and (ii) the new capital balances of A, B, C and D after the admission and revaluation.

Answer Options

Correct Answer A. Cash paid by D: 15000; New capitals - A: 132500, B: 88333.33, C: 44166.67, D: 15000
B. Cash paid by D: 20000; New capitals - A: 138000, B: 92000, C: 46000, D: 20000
C. Cash paid by D: 18000; New capitals - A: 144000, B: 96000, C: 48000, D: 18000
D. Cash paid by D: 12000; New capitals - A: 126000, B: 84666.67, C: 42333.33, D: 12000
Correct Answer
A
Correct Option:
Cash paid by D: 15000; New capitals - A: 132500, B: 88333.33, C: 44166.67, D: 15000

About This Question

This is Neco 2020 Financial Accounting Question 27. It is one of the objective questions from the 2020 Neco Financial Accounting examination.

Difficulty level: Hard .

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