Ranjan and Anjan were partners in a firm sharing profits and losses in 3:2. They admitted Sanjan for 1/4 share of profit on 1 Jan 2024.
Goodwill of the firm will be valued at 3 years purchase of average profit of last 4 years which were
2024: Rs. 80,000
2023: Rs. 1,40,000
2022: Rs. 2,00,000
2021: Rs. 1,60,000
The goodwill of the reconstituted firm will be
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 4,35,000
Under the average profit method, goodwill = average profit x number of years' purchase. The admission of Sanjan only tells why goodwill is being valued; the ratio is not needed for the value of the firm's goodwill.
Total profit of 4 years = Rs. 80,000 + Rs. 1,40,000 + Rs. 2,00,000 + Rs. 1,60,000 = Rs. 5,80,000
Average profit = Rs. 5,80,000 / 4 = Rs. 1,45,000
Goodwill = Rs. 1,45,000 x 3 = Rs. 4,35,000
Rs. 1,45,000 is only the average profit; stopping there, before multiplying by 3 years' purchase, gives Option (1).
NCERT (2026-27 edition):
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