Consider the following facts about valuation of Goodwill of a partnership firm.

A. Goodwill valuation is done on change in profit sharing ratio among the existing partners.

B. Goodwill is valued on admission of a partner, to know the amount to be paid by him to compensate sacrificing partner (s).

C. Goodwill valuation is done on the retirement of a partner to know the amount to be paid to him as compensation for his sacrifice.

D. Goodwill valuation is done at the time of dissolution of a firm which involves sale of business as a going concern.

E. Goodwill valuation is done during the distribution of profits of the partnership firm.

Choose the correct answer from the options given below.

A, B, C and D only

The correct answer is option (4) : A, B, C and D only.

A. Goodwill valuation is done on change in profit sharing ratio among the existing partners- This is correct. When there is a change in the profit-sharing ratio among existing partners, goodwill needs to be revalued to calculate the gain or sacrifice of the partners so that the sacrificing partner can be compensated by the gaining partner.

B. Goodwill is valued on the admission of a partner, to know the amount to be paid by him to compensate sacrificing partner (s)- This is correct. When a new partner is admitted into the partnership, goodwill is valued to determine the amount the new partner needs to pay to compensate the existing partners for their share of goodwill.

C. Goodwill valuation is done on the retirement of a partner to know the amount to be paid to him as compensation for his sacrifice- This is correct. When a partner retires from the partnership, the goodwill needs to be valued to determine the amount to be paid to the retiring partner as compensation for their share of goodwill.

D. Goodwill valuation is done at the time of dissolution of a firm which involves the sale of business as a going concern- This is correct. During the dissolution of a partnership firm, if the business is sold as a going concern, the goodwill needs to be valued as part of the process of determining the firm's assets and liabilities.

E. Goodwill valuation is done during the distribution of profits of the partnership firm- This is incorrect. There is no need to value goodwill as the profits are distributed between partners in their profit-sharing ratio.