Partners X and Y share profits in the ratio . Before admission of a new partner Z, the firm’s net assets are Rs. and goodwill is valued at Rs. . Z is to be admitted and is given goodwill of Rs. in the old profit‑sharing ratio. At the same time the firm revalues its assets: the building increases by Rs. and the stock decreases by Rs. . Compute the total amount that will be credited to the firm’s books as a result of Z’s admission (goodwill transferred + revaluation reserve).
Answer
Rs. 40,000
The correct answer is Rs. 40,000 — Hence the total credit to the books is Rs. .
Step-by-step solution
- Goodwill transferred to Z is given as Rs. .
- Calculate net revaluation gain: increase – decrease .
- Add the two amounts: .
- Hence the total credit to the books is Rs. .
Common mistake: Adding the stock decrease instead of subtracting it, which gives a lower net gain.
Concept tested: Admission – goodwill and revaluation
Published · How this solution was prepared and checked
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