Suhas and Vilas were partners in a firm with capitals of Rs 4,00,000 and Rs 3,00,000 respectively. They admitted Prabhas as a new partner for a \( \frac{1}{5} \) share in future profits. Prabhas brought Rs 2,00,000 as his capital. Prabhas' share of goodwill will be:
Show Hint
- Rs 20,000
- Rs 10,00,000
- Rs 9,00,000
- Rs 1,00,000
The Correct Option is A
Solution and Explanation
To calculate Prabhas' share of goodwill, we follow these steps:
1. Calculate the Total Capital of the New Firm (Based on Prabhas's Share):
Prabhas brings in Rs 2,00,000 for a 1/5 share.
Therefore, the total capital of the new firm should be Rs 2,00,000 * 5 = Rs 10,00,000
2. Calculate the Actual Total Capital of the Firm:
Suhas's capital: Rs 4,00,000
Vilas's capital: Rs 3,00,000
Prabhas's capital: Rs 2,00,000
Actual total capital: Rs 4,00,000 + Rs 3,00,000 + Rs 2,00,000 = Rs 9,00,000
3. Calculate the Hidden Goodwill:
Hidden Goodwill = Total Capital of the New Firm (based on new partner's capital) - Actual Total Capital
Hidden Goodwill = Rs 10,00,000 - Rs 9,00,000 = Rs 1,00,000
4. Calculate Prabhas's Share of Goodwill:
Prabhas's share of goodwill = Total Hidden Goodwill * Prabhas's share
Prabhas's share of goodwill = Rs 1,00,000 * (1/5) = Rs 20,000
Final Answer:
Therefore, Prabhas' share of goodwill is Rs 20,000.
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