Vikrant, Gaurav and Nitin share profits equally. They decide that in future Nitin will get 1/5th sharein profits. On the day of change, firm's goodwill is valued 30,000. What will be the treatment ofgoodwill ?
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Given: Vikrant, Gaurav, and Nitin share profits equally. They decide that in the future Nitin will get 1/5th share in profits. On the day of change, the firm's goodwill is valued at 30,000.
To find: treatment of the goodwill
Solution:
Nitin will get 1/5th sharein profits = 1/5 into 30,000
= 6000
Remaining share= 4/5
Vikrant's share= 4/5 into 1/2 into 30,000= 12,000
Gaurav's share= 4/5 into 1/2 into 30,000= 12,000
Goodwill A/C Dr. 30,000
To Vikrant A/c 12,000
To Gaurav A/C . 12,000
To Nitin A/C . 6,000
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