Question

L and M are partners in a firm sharing profits and losses in the ratio of 3 : 2. Their capitals were ₹ 6,40,000 and ₹ 4,00,000 respectively. N was admitted for `1/5`th share in the profits of the firm. He brought ₹ 4,80,000 as his capital. The goodwill of the firm will be ______.

Options

• ₹ 8,80,000

• ₹ 1,76,000

• ₹ 13,60,000

• ₹ 2,72,000

Answer 1

L and M are partners in a firm sharing profits and losses in the ratio of 3 : 2. Their capitals were ₹ 6,40,000 and ₹ 4,00,000 respectively. N was admitted for `1/5`th share in the profits of the firm. He brought ₹ 4,80,000 as his capital. The goodwill of the firm will be ₹ 8,80,000.

Explanation:

N’s Capital = ₹ 4,80,000

N’s Share = `1/5`

If ₹ 4,80,000 represents `1/5`th of the total firm’s capital, the total estimated capital of the entire firm is:

Total Inferred Capital = `4,80,000 xx 5/1`

= 24,00,000

Calculate the Actual Combined Capital of all Partners:

Actual Combined Capital = 6,40,000 + 4,00,000 + 4,80,000

= 15,20,000

Total Goodwill = Total Inferred Capital − Actual Combined Capital

= 24,00,000 + 15,20,000

= 8,80,000