A, B and C are equal partners. D is admitted to the firm for 1/4th share. D brings ₹20,000 as capital and ₹5,000 being half of his share of premium for goodwill. What is the value of goodwill of the firm?

₹40,000

The correct answer is option 2- ₹40,000.

D's contribution of goodwill = ₹5,000 which is half of his share of goodwill
Thus, D's share of goodwill = 5,000 x 2
                                           = ₹ 10,000

D's share in total goodwill = 1/4th
In other words, 1/4th share of goodwill = ₹10,000
Thus, Goodwill of firm = 10,000 x 4/1
                                   = ₹40,000