Question

A and B are partners in a firm with capital of ₹ 60,000 and ₹ 1,20,000 respectively. They decide to admit C into the partnership for 1/4th share in the future profits. C is to bring in a sum of ₹ 70,000 as his capital. Calculate amount of goodwill.

Answer 1

Solution:

Actual Capital of the firm after admission of C

                             =  A's Capital + B's Capital + Cs Capital

                             = 60,000 + 1,20,000 + 70,000 = 2,50,000

Capitalised value of the firm on the basis of Cs share= 70,000 x $\frac{4}{1}$

                                                                   = 2, 80, 000

Goodwill = Capitalised value of the firm - Actual Capital of the firm

              = 2, 80,000 - 2, 50, 000

             = 30,000