Goodwill Accounting

Premium distribution depends on sacrificing ratio. So first subtract new share from old share to find sacrifice.

New partner's premium is (₹144000 \times 1/6=₹24000). The first partner's part is (5/8), so (₹15000) is credited.

C's premium is (₹125000 \times 1/5=₹25000). In old ratio (2:3), B's part is (3/5), so he gets (₹15000).

Existing goodwill is written off in old ratio. The second partner's share is (3/9), so (₹18000) is debited.

Direct answer: Option A, ₹12,000. The new partner’s goodwill premium is calculated only on the share acquired: ₹210,000 × 1/7 = ₹30,000. He brings ₹18,000 in cash, so the unpaid or remaining goodwill is ₹30,000 − ₹18,000 = ₹12,000. Option A is correct because it is the exact shortfall. Option B, ₹30,000, is the full premium before considering the cash brought, so it is not the balance. Option C, ₹18,000, is only the amount actually brought, not the amount still to be adjusted. Option D, ₹48,000, has no basis and results from adding rather than subtracting. The important idea is that goodwill is based on the new partner’s fraction, not on the whole goodwill amount. Memory cue: required premium minus cash brought equals unpaid goodwill.

The abnormal profit must be deducted to determine normal average profit: ₹96,000 − ₹16,000 = ₹80,000. Therefore, goodwill = normal average profit × years' purchase = ₹80,000 × 3 = ₹2,40,000. Option B is incorrect because it multiplies the unadjusted average profit of ₹96,000 by 3. Exam tip: Adjust the average profit for abnormal items before applying the years' purchase method.

The governing concept is weighted average profit, where each year’s profit is multiplied by its assigned weight. The weighted profits are ₹50,000 × 1 = ₹50,000, ₹70,000 × 2 = ₹1,40,000, and ₹90,000 × 3 = ₹2,70,000. Their total is ₹4,60,000 and the total weight is 6, giving weighted average profit of ₹4,60,000 ÷ 6 = ₹76,666.67. Goodwill at two years’ purchase is ₹76,666.67 × 2 = approximately ₹1,53,333.33. Thus option A is correct. Option B is an unweighted profit, option C uses an incorrect base, and option D does not follow the weighted calculation.

Normal profit = Capital employed × Normal rate of return = ₹8,00,000 × 10% = ₹80,000. Super profit = Average profit − Normal profit = ₹1,30,000 − ₹80,000 = ₹50,000. Therefore, option A is correct. In exams, calculate normal profit first and subtract it from average profit.

Total goodwill is (₹28000 \times 5=₹140000). New partner's share is (₹140000 \times 1/7=₹20000).

Under the capitalization of average profit method, capitalized value = Average Profit × 100 ÷ Normal Rate of Return = ₹1,05,000 × 100 ÷ 15 = ₹7,00,000. Goodwill = Capitalized Value − Actual Capital = ₹7,00,000 − ₹6,20,000 = ₹80,000. Therefore, option A is correct. Option B is only the capitalized value of the business, not goodwill. Exam tip: First calculate the capitalized value and then subtract the actual capital.

Under the capitalization of super profit method, goodwill = Super Profit ÷ Normal Rate of Return. Therefore, goodwill = ₹36,000 ÷ 12% = ₹36,000 ÷ 0.12 = ₹3,00,000. Option B incorrectly results from multiplying the super profit by 12. In the exam, convert the percentage rate into decimal form before dividing.

A's sacrifice is (9/70) and B's sacrifice is (1/70). New partner's premium is (₹20000), so A should get (₹18000); check ratio carefully in exams.

Old shares were (8/15,4/15,3/15) and new shares are (7/15,4/15,3/15). Only the first partner sacrificed (1/15).

Estimated total capital is (₹90000 \div 1/4=₹360000). Actual total capital is (₹250000+₹90000=₹340000), so goodwill is (₹20000).

Estimated total capital is (₹330000). Actual total capital is (₹340000), so hidden goodwill does not arise.

Direct answer: Option A, ₹25,000. The new partner brings total goodwill of ₹45,000. The sacrificing ratio is 4:5, so the second partner’s share is 5 out of 9 parts. His credit is therefore ₹45,000 × 5/9 = ₹25,000. If he withdraws the complete amount, the firm pays him ₹25,000; consequently, Bank is credited by ₹25,000 in the withdrawal entry. Option A is correct. Option B, ₹20,000, is not the second partner’s share; it does not follow from 5/9. Option C, ₹45,000, is the entire premium, not the second partner’s portion. Option D, ₹5,000, is only the difference between the two ratio portions and is irrelevant. First divide by 9, then multiply by 5. Memory cue: the partner who sacrifices 5 parts receives 5/9 of the premium.

The incoming partner’s share is 1/8, so the required goodwill premium is 1/8 of ₹240,000, equal to ₹30,000. The partner brings only ₹18,000 in cash, leaving ₹12,000 unpaid. The sacrificing ratio is 1:2, so the second old partner receives 2/3 of the total premium. Therefore the total amount credited to the second partner is 2/3 × ₹30,000 = ₹20,000. Option A is correct.

The distinction between total credit and cash received is important. From the ₹18,000 actually brought in cash, the second partner’s proportional share is 2/3 × ₹18,000 = ₹12,000. However, the question asks for the total credit, so the second partner must also receive the appropriate share of the ₹12,000 deficiency, namely ₹8,000. Together, ₹12,000 + ₹8,000 = ₹20,000. Thus ₹12,000 would be plausible only if the question asked for the cash portion alone, not the complete credit due.

The governing partnership rule is that when an incoming partner does not bring goodwill in cash, the goodwill amount is credited to the sacrificing old partners in their sacrificing ratio. The ratio 3:2:3 contains 3 + 2 + 3 = 8 total parts. The third old partner sacrifices 3 parts, so the amount credited to that partner is ₹56,000 × 3/8. Since ₹56,000 ÷ 8 = ₹7,000, three parts equal ₹21,000. Therefore, option A is correct. Option B represents only two parts, option D represents one part, and option C is the entire goodwill rather than the third partner’s proportionate share.

New partner's goodwill is (₹88000 \times 3/11=₹24000). If cash is not brought, this amount is debited to his account.

Old shares are (5/9,4/9) and new shares are (4/9,3/9). Both sacrificed (1/9), so sacrificing ratio is (1:1).

First partner's sacrifice is (5/7-4/7=1/7) and second partner's sacrifice is zero. So the whole premium goes to first partner.

A's old share was 4/7 and his new share is 1/2, so A sacrifices 4/7 − 1/2 = 1/14. The old partners together sacrifice C's 1/7 share; therefore, B sacrifices 1/7 − 1/14 = 1/14.

The governing concept is distribution of goodwill premium in the sacrificing ratio. First add the ratio parts: 2 + 3 + 4 = 9. The third partner’s share is 4/9, so his receipt is ₹72,000 × 4/9 = ₹32,000. Therefore, option A is correct. Options B and C use incorrect ratio parts, while option D treats the entire premium as the third partner’s share.

Direct answer: Option A, ₹18,000. The required goodwill premium for the new partner is the total goodwill multiplied by his share: ₹300,000 × 1/6 = ₹50,000. He brings ₹32,000 in cash, so the goodwill not brought is ₹50,000 − ₹32,000 = ₹18,000. Option A is correct because it is the unpaid balance. Option B, ₹50,000, is the required total premium before cash is considered. Option C, ₹32,000, is the cash actually brought, not the missing amount. Option D, ₹82,000, incorrectly adds the required premium and the cash. The calculation must use the incoming partner’s share, because he obtains only one-sixth of the business goodwill. Memory cue: find the share-based premium first, then subtract the cash received.

Existing goodwill is written off in old ratio. The third partner's part is (2/10), so (₹18000) is debited.