Question

Mehak and Chehak were partners with capital of ₹ 40,000 each. They admitted Aadi as a new partner for `1/5` share in the profits of the firm. Aadi brought ₹ 80,000 as his capital. On Aadi’s admission, the Profit and Loss Account of the firm showed a debit balance of ₹ 10,000. The value of the goodwill of the firm on Aadi’s admission will be ______.

Options

• ₹ 2,50,000

• ₹ 2,40,000

• ₹ 2,30,000

• ₹ 4,00,000

Answer 1

Mehak and Chehak were partners with capital of ₹ 40,000 each. They admitted Aadi as a new partner for `1/5` share in the profits of the firm. Aadi brought ₹ 80,000 as his capital. On Aadi’s admission, the Profit and Loss Account of the firm showed a debit balance of ₹ 10,000. The value of the goodwill of the firm on Aadi’s admission will be ₹ 2,50,000.

Explanation:

Calculate the Total Estimated Capital of the Firm based on the new partner’s contribution:

Aadi brings ₹ 80,000 for a `1/5` share in profits.

Total Estimated Capital = New Partner’s Capital × Reciprocal of his share

= `80,000 xx 5/1`

= ₹ 4,00,000

Given:

Mehak’s Capital = ₹ 40,000

Chehak’s Capital = ₹40,000

Aadi’s Capital =  ₹ 80,000

Accumulated Loss (P & L Debit Balance) = ₹ 10,000

Actual Combined Adjusted Capital = (40,000 + 40,000 + 80,000) − 10,000

= 1,60,000 − 10,000

= 1,50,000

Goodwill = Total Estimated Capital − Actual Combined Adjusted Capital

= 4,00,000 − 1,50,000

= ₹ 2,50,000