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A and B are partners in a firm sharing profits in 3:2. On 1.4.2020 they decided to admit C into partnership for 1/6 share in the profits. For this purpose, goodwill of the firm was valued on the basis of 3 years’ purchase of the average profits of the last five years. The profit or loss of the last five years were:

2015-16: ₹4,00,000; 2016-17: ₹5,00,000; 2017-18: (₹60,000);

2018-19: ₹1,50,000; 2019-20:₹2,50,000

..

On 1st January, 2018, a fire broke out which resulted into a loss of goods of ₹3,00,000. A claim of ₹70,000 was received from the insurance company.

ii.

During the year ended 31st March, 2020 the firm received an unexpected tax refund of ₹80,000

Journalise the treatment of goodwill on C’s admission.

Zaraaa Asked question December 30, 2023
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