Question

Ram and Shyam are partners in a firm with capital of $Rs.4,80,000$ and $Rs.3,10,000$ respectively. They admitted Ganesh as a partner with ${\left( {\dfrac{1}{4}} \right)^{th}}$ share of profit. Ganesh brings $Rs.3,00,000$ as his capital. Ganesh’s share of goodwill will be__________.
${\text{(A) Rs}}{\text{.1,10,1000}}$
${\text{(B) Rs}}{\text{.27,500}}$
${\text{(C) Rs}}{\text{.17,500}}$
${\text{(D) Rs}}{\text{.70,000}}$

Answer 1

Hint: Here we will calculate the value of goodwill by substituting the given data in the appropriate required formulas. First, we have to find the capitalized value of the firm. After some simplification we get the required answer.

Formula used: ${{\text{Value of goodwill}} = {\text{Capitalised Value of firm}} \times {\text{Net Worth}}}$

Complete step-by-step solution:
We know the capital of ram is $Rs.4,80,000$,
The capital of shyam is $Rs.3,10,000$,
The capital of Ganesh is $Rs.3,00,000$ and
The share Ganesh has in the firm is: ${\left( {\dfrac{1}{4}} \right)^{th}}$
Now the goodwill of the company is:
${{\text{Value of goodwill}} = {\text{Capitalised Value of firm}} \times {\text{Net Worth}}}$
Now we find:
Capitalized value of firm = (Incoming partners’ capital $ \times $ Reciprocal of share of incoming partner) – (Total capital after taking into consideration the capital brought in by new partner)
On substituting the values of the capital bought by Ganesh, Ram and Shyam and the reciprocal value of Ganesh’s share in the formula, we get:
$\Rightarrow$${\text{Capitalised Value of firm = }}\left( {{\text{300000}} \times \left( {\dfrac{4}{1}} \right)} \right){\text{ - (480000 + 310000 + 300000)}}$
On multiply and add the term we get:
$\Rightarrow$${\text{Capitalised Value of firm = (1200000) - (1090000)}}$
On subtracting we get:
$\Rightarrow$${\text{Capitalised Value of firm = 110000}}$
Now since we know the capitalized value of the firm, we will now calculate the share of goodwill for Ganesh.
Since we know the share of Ganesh in the firm is ${\left( {\dfrac{1}{4}} \right)^{th}}$, the goodwill share of Ganesh will be:
$\Rightarrow$${\text{Goodwill Share = }}\dfrac{1}{4} \times 110000$
On dividing the terms and we get:
$\Rightarrow$${\text{Goodwill share = }}27500$,
Therefore, the correct option is $(B)$.

Note: Goodwill of a firm represents the reputation of it. The goodwill provides some extra benefits or profits in the future in comparison to other firms.
The goodwill is treated as a non-tangible asset in accounts. It is not considered to be a fictitious asset.
Goodwill increases when the company has been in action for some time in the market. Hidden goodwill which means the value of goodwill that a future partner would bring to the firm. If another partner joins the firm, then the new goodwill of the firm will be calculated.
A partner which brings goodwill to the firm is considered to be a vital asset.