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Q 1.Mr. Ahmed has been working in a small company for many years and earns a living. Due to theincrease in the size of his family (dependent members), the income earned now proves to beinsufficient. Mr. Ahmed approaches his friend Mr. Azad, who has plans of starting a new venture.Mr. Azad is skilled, passionate and has new ideas that would enable him to start a newmanufacturing venture, but lacks capital. Mr. Ahmed, who knows little about doing business, hassaved money over the years and plans to invest the same in a partnership concern with Mr. Azad.Mr. Ahmed wishes to continue his job as well as participate in the partnership concernonly by investing his saved money.Using the above caseA) You are required to advise and explain in detail, the nature of partnership that the abovepeople must enter into (2.5 Marks)B) List down the various clauses that need to be incorporated in the partnership deed.(2.5 Marks)Q 2.Razan and Rawan were partners sharing the profits and losses of their partnership firm “ Maa andMe ” in the ratio of 5:3. As the duo were struggling with managing the ever increasing financialneeds of their business and hence they decided to admit Rehab in their partnership firm. Rihab, arich lady was drawn in to induce funds in the cash strapped business. She agreed to participate inthe struggling venture demanding a 5/9 share in profits, which was agreed by Razan and Rawan.You are requested to explain in detail as to how the reconstitution of the firm would takeplace considering each and every necessary adjustment including calculation whereverapplicable. (5 Marks)Page 5 of 11Q 3.Partners A, B and C started their partnership firm M/s. ABC LLC in Muscat with capitals of OMR80,000; OMR 48,000 and OMR 40,000 respectively on 1.1.2019. They prepared Partnership Deedfor the partnership and it contains the various clauses related to – the firm has to pay the partners@ 5.5 % p.a., for their capital contributed to the business and the partners have to pay @ 2.5% fortheir drawings taken from the business during the financial year. Further the firm has to pay salaryto A @ OMR 600 per month, @ 10% commission to B and C and bonus to A and C @ OMR 500 each.Finally the firm’s Profit and Losses for the partners to be shared at the end the financial year Up toOMR 9,000 in the ratio of 4:3:2 and Above OMR 9,000 equally. The net profit earned by the firmduring the year ended 31st December 2019 amounted to OMR 55,500. The partners were drawnthe money from the firm during the financial year is – A OMR 4,800: B OMR 3,200 and C OMR 2,000.Prepare both Profit and Loss Appropriation Account and Fixed & Fluctuating Capital Accounts of thePartners in M/s. ABC LLC. On what basis the items which are debited and credited in that account –Comment. The balance of two different methods of capital accounts is differs from one another.Why? Explain it with the accurate values. (2+2+1 = 5 Marks)Page 6 of 11Q4. AM/s. Al Hilal LLC started with Capital OMR 800,000, Total Tangible Assets OMR 1,000,000 andCurrent Liabilities OMR 100,000 and decided to admit a new partner in the business and also toreceive the amount of goodwill from the incoming partner. The concern wishes to calculate thevalue of goodwill on the basis of four years purchase of the firm by different methods, such asAverage Profit and Super Profit. The books of accounts revealed some information related to pastyears’ profits of 2011 – OMR 15,000, 2012 – OMR 20,000, 2013 – OMR 25,000, 2014 – OMR 30,000,2015 – OMR 35,000, 2017 – OMR 40,000, 2018 – OMR 45,000, 2019 – OMR 50,000. The concernexpects the Rate of Return @ 12.5 % normally.Compute the value of goodwill on the basis of 4 years purchase under Capitalization of AverageProfit Method and Super Profit Method. Which method of goodwill calculation is beneficial forthe firm? Why these two methods showing two different values? Give your comments with thecalculated values. (1+1+0.5=2.5 Marks)Q4. BThe firm also has two alternatives to find out the new ratio and sacrificing ratio of the partners areIf A and B are the partners sharing profits and losses in the ratio of 5:3, admitting C for 1/5th shareof future profits in which he acquires 3/16th from A and 1/16th from B and,If A and B are the partners and sharing profits and losses in the ratio of 4:1, admitting C as a newpartner in which he acquires 2/5th of A ’s share and 1/5 of B’s share.Calculate new ratio and sacrificing ratio of the partners and suggest which alternative is good forthe new partner? Comment it. (1+1+0.5 = 2.5 Marks)
Page 7 of 11Following information use in Question NO.5& 6Partners A, B and C running a partnership firm in the name of M/s. ABC LLC with their capitals ofOMR 60,000, OMR 40,000 and OMR 30,000 and an agreed sharing the profits and losses in the ratioof 3:2:1.respectively on 31.3.2020.The firm’s various assets and liabilities in the books of accounts are –Particular OMR Particular OMRPlant 60,000 Bank Overdraft 25,000Buildings 100,000 Sundry Creditors 100,000Furniture 25,000 Premises 40,000Land 70,000 Machinery 40,0006% Bonds 50,000 Stock 25,000Bank Loan 40,000 Sundry Debtors 70,000Profit & Loss A/c 25,000 Bills Receivable 25,000General Reserve 50,000 Bills Payable 80,000On 1.4.2020 they decided to admit D into the partnership for 1/5th of the future profits with theterms that D shall bring in a capital of OMR 50,000.The Goodwill of the firm being valued at OMR 40,000, Machinery, Land, Buildings and Plant are tobe appreciated by 10%. Provision for Doubtful Debts @ 5% is to be created against Debtors. Stock,Furniture, Premises are to be depreciated by 5%.Discount on Creditors is to be made against Creditors @ 2.5%. Provision for outstanding liability isto be created at OMR 4,000 and Bank Loan is to be maintained in the books.Q5.Journalize the above transactions with narrations and prepare the Revaluation Account. Giveyour comment with reasons about the values which are debited and credited in the RevaluationAccount. (2+2+1 = 5 Marks)Q6.Prepare Partners’ Capital Accounts and Balance Sheet of the reconstituted partnership firm.Give your views about the changes in the balance sheet after reconstitution. (2+2+1 = 5 Marks)Page 8 of 11Q7.Ali, Khalid and Salim are partners of a firm (AKS LLC) that deals in used computer, printer, Xeroxmachines, servers, repair, and maintenance service in corporates and on call services. Everythingwas going well, but all in sudden Salim has been died in road accident. Salim’s wife appointed asthe legal representatives to receive his share. Sharing profit and losses in the ratio of 5:3:2. Salimmaintain all accounts like dealing and making final accounts and bank dealing. Due to Salim’s deathit was difficult to collect all assets, liabilities and capital amount information because Khalid and Ali,they don’t have experiences to maintain the accounts. But at last they collect the below informationbut some information’s missing.Name of Accounts OMR Name of Accounts OMRCash at Bank ? Ali’s Capital 39,500Sundry Debtors 17,000 Khalid’s Capital 62,500Stock 25,000 Salim’s Capital 78,000Patents 18,000 General Reserve A/c 28,000Equipment 75,000 Premises 50,000Sundry Creditors 15,000Being a friend of Ali, you will help to find out the missing information and Salim’s settlement infollowing condition.Mr. Salim died on 31st March 2020. The legal representative of the deceased partner entitled toreceive his share after the following adjustments.a) Goodwill be valued at 2.5 year’s purchase of the average profit of the last four years,Which were 2016 OMR 32,500; 2017 OMR 30,000; 2018 OMR 40,000; 2019 OMR 37,500.b) Premises to be appreciated by OMR 62,500.c) Provision for doubtful debts to be made at 6% on debtord) The assets are to be valued as, Equipment be valued at OMR 70,000 and Patents at OMR20,000.e) For the purpose of calculating Salim’s share in the profit of 2020, the profit in 2020 shouldbe taken to have been earned on the same as in 2019.f) A sum of OMR15,000 is to be paid immediately to the executors of Salim and the balancetransferred to his loan account.You are required to pass necessary Journal entries with narrations to record the abovetransactions, prepare the Revaluation Account and Salim executors account.(2+1+2 = 5 Marks)Page 9 of 11Q8.
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