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Adam, Brain and Chris were equal partners of a firm with goodwill Rs. 1,20,000 shown in the balance sheet and they agreed to take Daniel as an equal partner on the term that he should bring Rs. 1,60,000 as his capital and goodwill, his share of goodwill was evaluated at Rs. 60,000 and the goodwill account is to be written off before admission. What will be the treatment for goodwill?
  • a)
    Write off the goodwill of Rs. 1,20,000 in old ratio.
  • b)
    Cash bought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio.
  • c)
    Both.
  • d)
    Non
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Adam, Brain and Chris were equal partners of a firm with goodwill Rs. ...
Treatment of Goodwill in Partnership Admission

Goodwill is an intangible asset that represents the reputation and brand value of a business. It is usually generated when a business operates successfully over a period of time. When a new partner is admitted to a partnership firm, the treatment of goodwill depends on the terms agreed by the partners.

In this case, Daniel is being admitted as an equal partner and he is bringing Rs. 1,60,000 as his capital and goodwill. His share of goodwill is evaluated at Rs. 60,000 and the existing goodwill of Rs. 1,20,000 is to be written off before admission. The treatment of goodwill in this case will be as follows:

1. Write off the goodwill of Rs. 1,20,000 in old ratio:
The existing goodwill of Rs. 1,20,000 will be written off from the balance sheet before admission. This will reduce the value of the firm's assets and also the value of the partners' capital accounts. The old partners (Adam, Brain and Chris) will share the loss of goodwill in their old ratio.

2. Cash bought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio:
Daniel is bringing Rs. 1,60,000 as his capital and goodwill. His share of goodwill is evaluated at Rs. 60,000. Therefore, he is bringing Rs. 1,00,000 as his capital. This amount will be credited to his capital account. The remaining Rs. 60,000 will be distributed among the old partners in their sacrificing ratio. This is because the old partners will be sacrificing their share of the existing goodwill to accommodate the new partner.

3. Both:
The correct answer is option C, which means that both the above treatments will be applied. The existing goodwill of Rs. 1,20,000 will be written off in old ratio and the cash brought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio.

In conclusion, the treatment of goodwill in partnership admission depends on the terms agreed by the partners. In this case, the existing goodwill will be written off and the cash brought in by the new partner will be distributed among the old partners.
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Community Answer
Adam, Brain and Chris were equal partners of a firm with goodwill Rs. ...
Total value of goodwill=120000
60000is shared by old partners
Daniel is get the share from old partners in sacrificing ratio. so and.is both(c)
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Adam, Brain and Chris were equal partners of a firm with goodwill Rs. 1,20,000 shown in the balance sheet and they agreed to take Daniel as an equal partner on the term that he should bring Rs. 1,60,000 as his capital and goodwill, his share of goodwill was evaluated at Rs. 60,000 and the goodwill account is to be written off before admission. What will be the treatment for goodwill?a)Write off the goodwill of Rs. 1,20,000 in old ratio.b)Cash bought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio.c)Both.d)NonCorrect answer is option 'C'. Can you explain this answer?
Question Description
Adam, Brain and Chris were equal partners of a firm with goodwill Rs. 1,20,000 shown in the balance sheet and they agreed to take Daniel as an equal partner on the term that he should bring Rs. 1,60,000 as his capital and goodwill, his share of goodwill was evaluated at Rs. 60,000 and the goodwill account is to be written off before admission. What will be the treatment for goodwill?a)Write off the goodwill of Rs. 1,20,000 in old ratio.b)Cash bought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio.c)Both.d)NonCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Adam, Brain and Chris were equal partners of a firm with goodwill Rs. 1,20,000 shown in the balance sheet and they agreed to take Daniel as an equal partner on the term that he should bring Rs. 1,60,000 as his capital and goodwill, his share of goodwill was evaluated at Rs. 60,000 and the goodwill account is to be written off before admission. What will be the treatment for goodwill?a)Write off the goodwill of Rs. 1,20,000 in old ratio.b)Cash bought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio.c)Both.d)NonCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Adam, Brain and Chris were equal partners of a firm with goodwill Rs. 1,20,000 shown in the balance sheet and they agreed to take Daniel as an equal partner on the term that he should bring Rs. 1,60,000 as his capital and goodwill, his share of goodwill was evaluated at Rs. 60,000 and the goodwill account is to be written off before admission. What will be the treatment for goodwill?a)Write off the goodwill of Rs. 1,20,000 in old ratio.b)Cash bought in by Daniel for goodwill will be distributed among old partners in sacrificing ratio.c)Both.d)NonCorrect answer is option 'C'. Can you explain this answer?.
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