A & B are partners with capitals of Rs.10,000 and Rs.20,000 respectively and sharing profits eqally. They admitted C as their third partner with 1/4th profits on the payment of Rs.12,000. The amount of hidden goodwill is _______.
A & B are partners with capitals of Rs.10,000 and Rs.20,000 respectively and sharing profits eqally. They admitted C as their third partner with 1/4th profits on the payment of Rs.12,000. The amount of hidden goodwill is _______.
The correct option is A Rs.6,000
Hidden Goodwill is the value of goodwill that is not mentioned at the time of admission of a new partner. If in the question, it is mentioned that the new partner requires to bring his/her share of goodwill, then in this case value of the firm's goodwill need to be calculated. It is calculated by taking the difference between the capitalised value of the firm and the net worth of the firm.
Value of Goodwill = Capitalised Value of Firm – Net Worth
Capitalised Value of Firm = C’s Capital × Reciprocal of his Share
= 12000 * (4/1)
Net Worth = Total Capital of New Firm (including C’s Capital)
= (10,000 + 20,000 +12000) = 42000
Value of Goodwill = 48000 - 42000 = 6000
Hidden Goodwill is the value of goodwill that is not mentioned at the time of admission of a new partner. If in the question, it is mentioned that the new partner requires to bring his/her share of goodwill, then in this case value of the firm's goodwill need to be calculated. It is calculated by taking the difference between the capitalised value of the firm and the net worth of the firm.
Value of Goodwill = Capitalised Value of Firm – Net Worth
Capitalised Value of Firm = C’s Capital × Reciprocal of his Share
= 12000 * (4/1)
Net Worth = Total Capital of New Firm (including C’s Capital)
= (10,000 + 20,000 +12000) = 42000
Value of Goodwill = 48000 - 42000 = 6000
