Question

A admitted as a new partner for 1/ 4 share of future profits, fails to bring in cash of Rs. 5,000 towards goodwill but the existing (old) partners B and C sharing profits in the ratio of 3 : 2 raise goodwill account at its full value. Therefore, partners will be credited for goodwill as:

• A. B = Rs. 3,000, C = Rs. 2,000, A = Nil
• B. B = Rs. 9,000, C = Rs. 6,000, A = Rs. 5,000
• C. B = Rs. 12,000, C = Rs. 8,000, A = Nil
• D. B = Rs. 2,250, C = Rs. 1,500, A = Rs. 1,250

Answer 1

Answer: (C)

B = Rs. 12,000, C = Rs. 8,000, A = Nil

Old ratio (B and C) = 3 : 2

A is admitted for 1/4 share of profit for which he was supposed to bring goodwill of Rs. 5000

According to A's share total goodwill of the firm is A's share to goodwill multiply by reciprocal of A's share of profit

Therefore, total goodwill = Rs. 5000 * (4/1) = Rs. 20000

Goodwill credited to old partner in old ratio is-

B = Rs. 20000 * (3/5) = Rs. 12000

C = Rs. 20000 * (2/5) = Rs. 8000