Question

A and B are partners in a business with capitals Rs. 10000 and Rs. 12000
respectively. They will get 5% interest on capital. A will get Rs, 500 per month
as manager and the rest of the profit will be divided equally between them. ILA
gets Rs. 16000 in a certain year, find the total profit of the year
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Answer 1

Answer:

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. 12000 * (4/1) - Rs. (10000 + 20000 + 12000)

Goodwill = Rs. 48000 - Rs 42000

Goodwill = Rs. 6000