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When Goodwill Exist in the Business

why is the va...

Question

why is the value of goodwill determined when a firm can be reconstituted?

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Solution

Dear Student
During reconstitution of a firm goodwill is calculated so as to compensate the sacrificing partners who had sacrificed their share of profit for the new/upcoming partner as the old partners are sacrificing their running, well established business share.
Hence value of goodwill is determined when a firm is reconstituted.
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