Multiple choice

X and Y are partners with capital of Rs. 9,000 and Rs. 10,000, Z is admitted into the firm with 1/3rd share of profit and bring Rs. 12,000 as his share of capital. How the goodwill of the firm would be valued?

  1. Rs. 5000

  2. Rs. 6000

  3. Rs. 10,000

  4. Rs. 12,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Z brings 12,000 for 1/3 share. Total capital of firm = 12,000 * 3 = 36,000. Combined capital of X, Y, Z = 9,000 + 10,000 + 12,000 = 31,000. Goodwill = Total capital - Combined capital = 36,000 - 31,000 = 5,000.

AI explanation

Z is admitted for a 1/3rd share and brings Rs. 12,000 as capital, so the total capital of the firm based on Z's share is Rs. 12,000 multiplied by 3, which equals Rs. 36,000. The combined capital of X and Y is Rs. 9,000 plus Rs. 10,000, totaling Rs. 19,000. Adding Z's capital of Rs. 12,000 gives a total actual capital of Rs. 31,000. The hidden goodwill is the total capital minus the actual capital, which is Rs. 36,000 minus Rs. 31,000, resulting in Rs. 5,000.

Keep practicing — related questions