Question

A and B are two partners in a firm having share capital of Rs. 13,000 and Rs.17,000 respectively. C is admitted for 1/3rd share of profit for which he is to bring Rs.20,000 for his share of capital. What is the goodwill of the firm?

• A. $Rs.9,000$
• B. $Rs.10,000$
• C. $Rs.8,000$
• D. $Rs.11,000$

Answer 1

Answer: (B)

$Rs.10,000$

When the value of the goodwill of the firm is not specifically given, the value of goodwill has to be inferred as follows:

Goodwill = (Incoming partner's capital * Reciprocal of share of incoming partner) - Total capital after taking into consideration the capital brought in by incoming partner.

Goodwill = [Rs. 20000 * (3/1)] - Rs. (13000 + 17000 + 20000)

Goodwill = Rs. 60000 - Rs. 50000

Goodwill = Rs. 10000