Multiple choice

Ramesh and Suresh are partners sharing profits in the firm in the ratio of 2 : 3 Goodwill appears in the books of firm at Rs 10,000. Rahim joins the firm for 1/5 share of profits. His share of Goodwill is estimated to be Rs 15,000. The old partners account will be credited with Goodwill by:

  1. Rs 50,000

  2. Rs 40,000

  3. Rs 75,000

  4. Rs 65,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Rahim brings 15,000 for 1/5 share, implying the total firm goodwill is 75,000. Since the existing goodwill is 10,000, the adjustment for the new partner's share relative to the old partners' ratio (2:3) is calculated based on the premium brought in. The total credit to old partners is the value of the goodwill brought by the new partner.

AI explanation

Rahim's estimated share of goodwill for a 1/5 share is Rs 15,000, making the total inferred goodwill of the firm Rs 75,000. We subtract the Rs 10,000 already appearing in the books to find the unrecorded goodwill of Rs 65,000. This unrecorded amount is credited to the old partners' accounts in their sacrificing ratio. The old partners account will be credited with goodwill by Rs 65,000.

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