A and B are partners sharing profits equally with capitals of Rs. 45,000 each. They admit C as a new partner f

Question

A and B are partners sharing profits equally with capitals of Rs. 45,000 each. They admit C as a new partner for a 1/3rd share in profits. C brings in Rs. 60,000 as his capital. Find the value of the firm's total Goodwill based on this transaction.

Accepted Answer

This problem requires us to calculate the Hidden Goodwill of the firm:Total Capitalized Value of the Firm based on C's capital contribution:

Total Capital = C’s Capital \times \frac{1}{C’s Profit Share}

Total Capital = Rs. 60, 000 \times \frac{3}{1} = Rs. 1, 80, 000

Combined Actual Capital of all partners post-admission:

Actual Capital = A’s Capital + B’s Capital + C’s Capital

Actual Capital = Rs. 45, 000 + Rs. 45, 000 + Rs. 60, 000 = Rs. 1, 50, 000

Value of the Firm's Goodwill:

Goodwill of Firm = Total Capitalized Value - Combined Actual Capital

Goodwill of Firm = Rs. 1, 80, 000 - Rs. 1, 50, 000 = Rs. 30, 000

A and B are partners sharing profits equally with capitals of $Rs. 45, 000$ each. They admit C as a new partner for a $\frac{1}{3} rd$ share in profits. C brings in $Rs. 60, 000$ as his capital. Find the value of the firm's total Goodwill based on this transaction.

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A and B are partners sharing profits equally with capitals of Rs. 45,000 each. They admit C as a new partner for a 31​rd share in profits. C brings in Rs. 60,000 as his capital. Find the value of the firm's total Goodwill based on this transaction.