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Valuation of Goodwill

Total profit = ₹ 50,000 + ₹ 40,000 + ₹ 80,000 + ₹ 70,000 = ₹ 2,40,000

 

Average profit = ₹ 2,40,000/4 = ₹ 60,000

 

Hence, goodwill at 2½ years’ purchase = ₹ 60,000 × 2½ = ₹ 1,50,000

 

X’s share of goodwill = ₹ 1,50,000 × 5/10 = ₹ 75,000

 

It is adjusted into the Capital accounts of Y and Z in the gaining ratio of 3 : 2 i.e. ₹ 45,000 and ₹ 30,000 respectively.

 

Share of profit payable to X [up to the date of death]

 

= ₹ 70,000 × 6/12 × 5/10

 

= ₹ 17,500

 

X’s share of Reserve fund = ₹ 30,000 × 5/10 = ₹ 15,000

 

Interest on X’s Capital = ₹ 1,20,000 × 9/100 × 6/12 = ₹ 5,400





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