Question

Sun and Star were partners in a firm sharing profits in the ratio of 2 : 1. Moon was admitted as a new partner in the firm. The new profit-sharing ratio was 3 : 3 : 2. Moon brought the following assets towards his share of goodwill and his capital:

Machinery ₹ 2,00,000; Furniture ₹ 1,20,000; Stock ₹ 80,000; Cash ₹ 50,000. If his capital is considered as ₹ 3,80,000, the goodwill of the firm will be:

Options

• ₹ 70,000

• ₹ 2,80,000

• ₹ 4,50,000

• ₹ 1,40,000

Answer 1

₹ 2,80,000

Explanation:

Total Assets Brought in = 2,00,000 + 1,20,000 + 80,000 + 50,000

= 4,50,000

Moon’s Share of Goodwill = Total Assets Brought in − Moon’s Capital

Moon’s Share of Goodwill = 4,50,000 − 3,80,000

= 70,000

Calculate the total goodwill of the firm (Hidden Goodwill Method):

Moon’s share = `2/8`

= `1/4`

Total Goodwill of Firm = `" Moon's Share of Goodwill" xx ("Total Shares")/("Moon's Share")`

Total Goodwill of Firm = `70,000 xx 4/1`

= 2,80,000