Question

H & M are partners in a firm sharing profits and losses in the ratio of $3:2$. Their capitals are $Rs.90,000$ and $Rs.60,000$ respectively. They admit K as a new partner who will get $1/6$th share in the profits of the firm. K brings in $Rs.37,500$ as his capital. Calculate hidden goodwill.

• A. $Rs.37,500$
• B. $Rs.75,000$
• C. $Rs.56,250$
• D. $Rs.60,000$

Answer 1

The correct option is A $Rs.37,500$

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

Particulars	Rs.
Incoming partner's capital * reciprocal of share of incoming partner (W.N.1) Less : Total capital after taking into consideration the capital brought in by the incoming partner (W.N.2)	225000 (187500)
Value of goodwill	37500

Working note:

1. Incoming partner's capital * reciprocal of share of incoming partner

= Rs. 37500 (1/6)

= Rs. 225000

2. Total capital after taking into consideration the capital brought in by the incoming partner

= H's capital + M's capital + K's capital

= Rs. (90000 + 60000 + 37500)

= Rs.187500