5. Accounting for Partnerships

Change In Profit Share — Quiz

Test your understanding of change in profit share with 5 practice questions.

Practice Questions

Question 1

Partners A and B share profits in the ratio of $ 3:2 $. They decide to change the ratio to $ 5:3 $. If the firm's goodwill is valued at $$ \$40,000 $$ and is not to be shown in the books, what is the net adjustment to Partner A's capital account?

Question 2

When there is a change in the profit-sharing ratio, and a firm has an Investment Fluctuation Fund (IFF), how is the IFF treated if the market value of investments is less than the book value, but the fall in value is less than the IFF amount?

Question 3

Partners A, B, and C share profits in the ratio of $ 4:3:1 $. They decide to change the ratio to $ 3:2:3 $. If the firm has an unrecorded asset of $$ \$16,000 $$ at the time of the change, how will this affect Partner B's capital account after being recorded?

Question 4

Partners X and Y share profits in the ratio of $ 7:3 $. They decide to change the ratio to $ 3:2 $. If the firm has an accumulated loss of $$ \$25,000 $$ that has not yet been distributed, what is the adjustment to Partner X's capital account?

Question 5

When a firm has a General Reserve and a Workmen's Compensation Reserve (WCR) at the time of changing the profit-sharing ratio, and there is a claim against WCR that is less than the WCR amount, how are these reserves treated?