A and B are partners. They admit C as a new partner. C contributes stock rs.30000;furniture rs.40000machinery rs.100000 and cash rs.20000 towards his capital and share of goodwill. Goodwill on the date of admission was valued at rs.180000. calculate C's share of goodwill and capital.?

Question

Answer

Calculation of C's Share of Goodwill and Capital

Calculation of C's Share of Goodwill

Goodwill on the date of admission = Rs. 180,000

There are 3 partners now, so the new goodwill will be valued at 3 times the old goodwill.

New goodwill = 3 x Rs. 180,000 = Rs. 540,000

C's share of goodwill = (C's total contribution / Total capital) x New goodwill

C's total contribution = Rs. 30,000 + Rs. 40,000 + Rs. 100,000 + Rs. 20,000 = Rs. 190,000

Total capital = A's capital + B's capital + C's total contribution = Total assets - Total liabilities

Assuming A's capital = B's capital, and Total assets = Total liabilities, we can simplify the calculation.

Total capital = 2A + 190,000

C's share of goodwill = (190,000 / (2A + 190,000)) x Rs. 540,000

Calculation of C's Share of Capital

C's share of capital = C's total contribution + C's share of goodwill

C's share of capital = Rs. 190,000 + C's share of goodwill

Substitute the value of C's share of goodwill from the previous calculation

C's share of capital = Rs. 190,000 + (190,000 / (2A + 190,000)) x Rs. 540,000

Explanation

When a new partner is admitted to a partnership firm, their contribution to the capital is not just the amount of cash they bring in. They may also contribute assets such as stock, furniture, and machinery. These assets are valued and added to the capital of the firm. Additionally, the new partner may also pay a share of the goodwill of the firm. Goodwill is the value of the reputation, customer base, and other intangible assets of the firm. The amount of goodwill paid by the new partner is calculated based on their total contribution and the value of the goodwill on the date of admission. The new partner's share of capital is calculated by adding their total contribution and their share of goodwill to the existing capital of the firm.

Answer

Stock a/c Dr 30000 Furniture a/c Dr 40000 Machinery a/c Dr 100000 Cash a/c Dr 20000 To Premium for Goodwill a/c 60000 To C's Capital a/c 130000 [{ C's goodwill is 1/3rd of firm's goodwill i.e.,180000} , {C's capital is = stock+furn.+much.+cash- premium for goodwill} here, premium for goodwill is the amount of goodwill bought by C]

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