what is hidden goodwill and how is it caculated?
Answers
Answer:
If the new partner requires to bring the share of goodwill, then, in this case, we have to calculate the value of the firm's goodwill. ... In other words, we can say hidden Goodwill is the Inferred Goodwill. This is not given in question but is implied from brought in capital by the new partner for his share in the firm.
Sometimes the value of goodwill is not given at the time of admission of a new partner. in that case the goodwill is calculated with the help of total capital/net worth of the firm and profit sharing ratio.
Calculation :-
To calculate the value of goodwill of the firm following steps are to be used:
1. Calculate the total capital of the firm on the basis of the capital brought by the new partner.
Total capital of the new firm = New Partner’s capital × reciprocal of new partner’s share
2. Find out the combined capital of all the partners including new partner.
Combined Capital of all Partners = Old Partners’ Capital + New Partner’s Capital
3. Hidden Goodwill = Total Capital of the new firm – Combined Capital of all Partners
Hope it helps,Please mark me as Brainliest.