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?
Answer & explanation
Correct answer: option 2
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