Sarthaks Test
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X and Y are partners sharing profits and losses in the ratio of 3: 2. They admit Z into partnership for 1/4th share in goodwill. Z brings in his share of goodwill in cash. Goodwill for this purpose is to be calculated at two years’ purchase of the average normal profit of past three years. Profits of the last three years ended 31st March, were: 2014 – Profit Rs.50,000 (including profits on sale of assets Rs.5,000). 2015 – Loss Rs.20,000 (including loss by fire Rs.30,000). 2016- Profit Rs.70,000 (including insurance claim received Rs.18,000 and interest on investments and Dividend received Rs.8,000). Calculate value of goodwill. Also, calculate goodwill brought in by Z.

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Goodwill-Rs.66,000; Z shall bring 1/4th of Rs.66,000 = Rs.16,500 as Goodwill]

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