Question

A. respectively Pee and Queue are equal partners in a firm. Their capitals show credit balances of Rs. 90,000 and Rs. 60,000 respectively. A new partner Are is admitted with 1/5th share in the profits. He brings Rs. 70,000 for his capital. Find the Value of Goodwill of the firm at the time of admission of Are. ​

Answer 1

ANSWER :

• ❖ If Pee and Queue are equal partners in a firm and their capitals show credit balances of Rs. 90,000 and Rs. 60,000 respectively and they admit Are into the partnership for 1/5 th share in the future profits, Are brings Rs. 70,000 as his capital; then the Amount of Goodwill will be Rs. 1,30,000.

___________________________________________________________

SOLUTION :

❒ Given :-

• Pee and Queue are equal partners in a firm and their capitals show credit balances of Rs. 90,000 and Rs. 60,000 respectively.

• Are is admitted as a new partner with 1/5th share in the profits.

• Are brings Rs. 70,000 for his capital.

❒ To Calculate :-

• Value of Goodwill of the firm = ?

______________________________________________

❒ Calculation :-

It is given that,

• Are is admitted as a new partner with $\tt{\dfrac{1}{5}}$ th share in the future profits.

• Are brings Rs. 70,000 for his capital.

So,

• ★ Total Capital of the new firm = Capital Invested by Are × Reciprocal of the Share of Are

⇒ Total Capital of the new firm = $\sf{Rs. \: 70,000 \times \dfrac{5}{1}}$

⇒ Total Capital of the new firm = Rs. 3,50,000

Again,

• Capital accounts of Pee and Queue show credit balances of Rs. 90,000 and Rs. 60,000 respectively.

• Capital of Are is Rs. 70,000.

So,

• ★ Total Capital of all the three partners = Capital of Pee + Capital of Queue + Capital of Are

⇒ 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 new firm = Rs. 3,50,000

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

Hence,

• ✪ Value of Goodwill = Total Capital of the new firm - 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