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The new profit-sharing ratio of A, B and C is 7:6:5. C is the new partner. If the goodwill attributable to C's share is ₹1,00,000, what is the total goodwill of the firm?

Answer and explanation

Correct answer: ₹3,60,000

The sum of the new ratio is 7+6+5=18, so C's share is 5/18. If 5/18 of the firm's total goodwill equals ₹1,00,000, then total goodwill = ₹1,00,000 × 18/5 = ₹3,60,000. The ₹3,00,000 option would give C only ₹83,333.33 as goodwill, so it is incorrect. Exam tip: Divide the incoming partner's goodwill by that partner's fraction in the new ratio to find total goodwill.

Related tags

Goodwill AccountingAdmission Of PartnerNew RatioReverse GoodwillNumericalReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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