A, B and C were partner's in a firm sharing profit and losses in the Ratio of 5 : 3 : 2. They admitted D into partnership for 1/5 share of profit which he takes equally from A and B. D brought sufficient amount of goodwill in cash Capital brought in by is Rs. 50,000. On the date of admission the Balance Sheet of A, B and C was as follows :
Balance Sheet as on 31st March, 2021
| Liability | Rs. | Assets | Rs. |
|---|---|---|---|
| Capital | Building and Furniture | 1,50,000 | |
| A 1,00,000 | Debtors 55,000 | ||
| B 60,000 | Provision 5,000 | 50,000 | |
| C 40,000 | 2,00,000 | Cash | 20,000 |
| Creditors | 50,000 | Profit and Loss (2020-21) | 30,000 |
| 2,50,000 | 2,50,000 |
Goodwill is to be valued at 3 years purchase of average profit of last 4 years which were Rs. 60,000 (2017-18), Rs. 60,000 (18-19), Rs. 30,000 (19-20). On revaluation it was found that all debtors are good.
From the above calculate amount of Goodwill :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 90,000
Goodwill = average profit of the last 4 years × 3 years' purchase. The balance sheet shows a debit balance of Profit and Loss (2020-21) of Rs. 30,000 on the assets side, which is the loss of the fourth year, so it is deducted.
Total of 4 years = Rs. 60,000 + Rs. 60,000 + Rs. 30,000 − Rs. 30,000 = Rs. 1,20,000
Average profit = Rs. 1,20,000 ÷ 4 = Rs. 30,000
Goodwill = Rs. 30,000 × 3 = Rs. 90,000
Leaving out the loss of 2020-21 overstates the average, because 2020-21 is one of the last four years.
NCERT (2026-27 edition):
NCERT (2026-27 edition): |
