Amol and Madhur are partner’s sharing profits in the ratio of 2:1. Tanish was admitted for ¼
share of which 1/8 was gifted by Amol. The remaining was contributed by Madhur.
Goodwill of the firm is valued at Rs. 40,000. How much amount for Goodwill will be
credited to Madhur's Capital account?
(a) Rs. 2,500
(b) Rs. 5,000
(c) Rs. 20,000
(d) Rs. 40,000
with explanation please
Answers
The amount of Goodwill credited to Madhur's capital account is Rs. 20,000. (Option c)
Given:
Amol and Madhur's ratio= 2:1
Tanish's share= 1/4
Ratio sacrificed by Amol= 1/8
Value of goodwill= Rs. 40,000
To find:
Amount of Goodwill credited to Madhur's account
Solution:
We can find the solution by following the given steps -
We know that on the admission of a new partner, the old partners sacrifice their share and the profit/ loss sharing ratio changes.
Tanish's total share is 1/4 and Amol's contribution is 1/8.
So, the remaining contribution is made by Madhur.
Remaining contribution= 1/4-1/8= 1/8
The sacrificing ratio of Amol and Madhur will be 1/8:1/8
=1:1
The Goodwill will be credited to the old partners' accounts in their sacrificing ratio.
Amount of Goodwill= Rs. 40,000
Madhur's share= 1/2×40,000
= Rs.20,000
Therefore, the amount of goodwill credited to Madhur's capital account is Rs. 20,000.
"(c) Rs. 20,000"
Explanation:
Amol and Madhur's ratio= 2:1
Tanish's share= 1/4
Ratio sacrificed by Amol= 1/8
Value of goodwill= Rs. 40,000
Remaining contribution of Madhur = 1/4-1/8 = 2-1/8 = 1/8
The sacrificing ratio of Amol and Madhur will be 1/8 : 1/8 = 1 : 1
Amount of Goodwill= Rs. 40,000
Madhur's share = 1/2 × 40,000 = 20000
Therefore, the amount of goodwill credited to Madhur's capital account is 20000.