Question

# A and B are partners in the ratio of 2 : 1. They admit C for 1/4 share who contributes Rs. 30,000 for his share of goodwill. The total value of the goodwill of the firm is _________.

A
Rs.30,000
B
Rs.90,000
C
Rs.1,20,000
D
Rs.1,50,000

Solution

## The correct option is D $$Rs. 1,20,000$$Old ratio (A and B) = 2 : 1C is admitted for 1/4th share of profitFor 1/4 share C bring Rs. 30000 for goodwillTherefore, goodwill of the firm = C's share of goodwill * Reciprocal of C's profit shareTotal goodwill = Rs. 30000 * (4/1) = Rs. 120000Fundamentals of Accounting and Auditing

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