Question

A and B are partners sharing profit in equal ratio. A's capital is 90,000 and B's capital is *60,000. They admit C and agree to give him 1/5th share in future profit, C brings 70,000 as his capital. Value of hidden goodwill at the time of admission of C is:
(a) 70,000
(b) 1,30,000
(c) 3,50,000
(d) 1,50,000 ​

Answer 1

ANSWER :

❖ Option (b) Rs. 1,30,000

• ➺ If A and B are partners sharing profit in equal ratio, A's capital is Rs. 90,000 and B's capital is Rs. 60,000 and they admit C and agree to give him 1/5th share in future profit, C brings 70,000 as his capital; then the value of Hidden Goodwill of the firm at the time of admission of C will be Rs. 1,30,000.

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SOLUTION :

❒ Given :-

• A and B are partners sharing profit in equal ratio.

• A's capital is Rs. 90,000 and B's capital is Rs. 60,000.

• C is admitted for 1/5th share in profits.

• C brings Rs. 70,000 as his capital.

❒ To Calculate :-

• Value of Hidden Goodwill of the firm = ?

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❒ Calculation :-

It is given that,

• C is admitted for $\sf{\dfrac{1}{5}}$ th share in profits.

• C brings Rs. 70,000 as his capital.

So,

• ★ Total Capital of the firm after C's admission = Capital Invested by C × Reciprocal of the Share of C

⇒ Total Capital of the firm after C's admission = $\rm{Rs. \: 70,000 \times \dfrac{5}{1}}$

⇒ Total Capital of the firm after C's admission = Rs. 3,50,000

Again,

• A's capital is Rs. 90,000.

• B's capital is Rs. 60,000.

• C's capital is Rs. 70,000.

So,

• ★ Total Capital of all the all partners = Capital of A + Capital of B + Capital of C

⇒ Total Capital of all the three partners = Rs. 90,000 + Rs. 60,000 + Rs. 70,000

⇒ Total Capital of all the three partners = Rs. 2,20,000

Now,

• Total Capital of the firm after C's admission = Rs. 3,50,000

• Total Capital of all the three partners = Rs. 2,20,000

Hence,

• ✪ Amount of Goodwill of the firm = Total Capital of the firm after C's admission - Total Capital of all the three partners

➨ Value of Goodwill = Rs. 3,50,000 - Rs. 2,20,000

∴ Value of Goodwill = Rs. 1,30,000