Neco Model Questions Vol1 2023 Financial Accounting Question 13

Practice objective / multiple choice question 13 from the 2023 Neco Model Questions Vol1 Financial Accounting examination.

Neco Model Questions Vol1 2023 Financial Accounting Objective / Multiple Choice Hard Difficulty
Question 13 NECO_MODEL_QUESTIONS_VOL1 • 2023 • FINANCIAL_ACCOUNTING • objective

A partnership of A and B shares profit in the ratio 3:2. Their capital balances are A: ₦120,000 and B: ₦80,000.\n\nC is admitted as a new partner. The terms of admission are as follows:\n1. C brings in cash of ₦100,000 for a 25% share of future profits.\n2. Goodwill of the firm is valued at ₦60,000 and is to be shared between the existing partners in their old profit‑sharing ratio.\n3. At the time of admission the partnership re‑values its building from a book value of ₦200,000 to a market value of ₦250,000. The revaluation surplus is to be shared among all partners in the new profit‑sharing ratio.\n4. After admission the profit‑sharing ratio becomes A:B:C = 2:1:1.\n\nDetermine (a) the amount of goodwill credited to A and B, (b) the revaluation surplus allocated to each partner, and (c) the new capital balances of A, B and C after admission.

Answer Options

A. Goodwill - A: ₦40,000; B: ₦20,000. Revaluation surplus - A: ₦25,000; B: ₦12,500; C: ₦12,500. New capitals - A: ₦185,000; B: ₦112,500; C: ₦112,500.
B. Goodwill - A: ₦36,000; B: ₦24,000. Revaluation surplus - A: ₦30,000; B: ₦10,000; C: ₦10,000. New capitals - A: ₦186,000; B: ₦114,000; C: ₦110,000.
Correct Answer C. Goodwill - A: ₦36,000; B: ₦24,000. Revaluation surplus - A: ₦25,000; B: ₦12,500; C: ₦12,500. New capitals - A: ₦181,000; B: ₦116,500; C: ₦112,500.
D. Goodwill - A: ₦30,000; B: ₦30,000. Revaluation surplus - A: ₦20,000; B: ₦15,000; C: ₦15,000. New capitals - A: ₦170,000; B: ₦125,000; C: ₦115,000.
Correct Answer
C
Correct Option:
Goodwill - A: ₦36,000; B: ₦24,000. Revaluation surplus - A: ₦25,000; B: ₦12,500; C: ₦12,500. New capitals - A: ₦181,000; B: ₦116,500; C: ₦112,500.

About This Question

This is Neco Model Questions Vol1 2023 Financial Accounting Question 13. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Financial Accounting examination.

Difficulty level: Hard .

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