Question

A and B are partners with capitals of Rs.50,000 each. They admit C for 1/4th share. C brings
in Rs.80,000 as his share of capital. Profit & Loss A/c showed a credit balance of Rs.30,000
on that date. Value of Hidden goodwill will be

Answer 1

                                                     

                                                       

                                                                                     

Explanation:

Calculation of hidden goodwill:

Total Capital of the firm after admission= 50000+50000+80000+40000

                                                                 = 220000

Total capital of the firm based on Z's capital= 80000 * 4/1

                                                                         = 320000

Hidden goodwill= 320000-220000= 100000

Z's share of Goodwill= 100000 * 1/4= 25000