Question

what will be the amount of goodwill in opening entry
if the following balances appear in the books of RR & Sons?
Assest = cash in hand rs430
cash at bank = rs 2675
sundry debtors tangible 7495
closing stock rs 9000
machinery and equipments rs 600
liablities and capital - Creditor rs 5600:
capita rs 25000​

Answer 1

Given:

Assets

• cash in hand = Rs. 430
• cast at bank = Rs 2675
• sundry debtors = Rs 7495
• closing stock = Rs 9000
• machinery and equipment = Rs 600

Liabilities and Capital

• Creditors = Rs 5600
• Capital = Rs 25000

To find:

value of goodwill.

Solution.

Goodwill is the predominant reputation or brand value of a business which is evaluated during some events in a business. It is usually calculated when a new partner joins in partnership firms or when buying and selling companies.

Here, goodwill will be calculated by the formula given below.

$goodwill \: = \\ \: \: \: \: total \: assets - total \: liabilities$

First, let's calculate the total assets.

Total Assets

cash in hand = Rs. 430

cast at bank = Rs 2675

sundry debtors = Rs 7495

closing stock = Rs 9000

machinery and equipment = Rs 600

adding all the assets to calculate the total assets.

$total \: assets = 430 + 2645 + 7495 + 9000 + 600$

$total \: assets = 20200$

Total Liabilities

Creditors = Rs 5600

Capital = Rs 25000

adding all the liabilities to calculate the total liabilities

$total \: liabilities = 5600 + 25000$

$total \: liabilities =30600$

Therefore goodwill,

using total assets and total liabilities.

$goodwill \: = \\ \: \: \: \: total \: assets - total \: liabilities$

$goodwill = 20200 - 30600$

$goodwill = (10400)$

Therefore the amount of opening goodwill in the books of RR and sons will be Rs. (10400) on the credit side.