Q17 Dinesh and Mahesh are partners sharing profits and losses in the ratio of 3 2 They admit Ramesh ......

Q17.Dinesh and Mahesh are partners sharing profits and losses in the ratio of 3 : 2. They admit Ramesh into partnership for 1/4th share in profits. Ramesh brings in his share of goodwill in cash. Goodwill for this purpose shall be calculated at two years' purchase of the weighted average normal profit of past three years. Weights being assigned to each year 2017−1; 2018−2 and 2019−3. Profits of the last three years were:

2017 − Profit 50,000 including profits on sale of assets 5, 000

.2018 − Loss 20,000 including loss by fire 35, 000

.2019 − Profit 70,000 includinginsuranceclaimreceived 18, 000andinterestoninvestmentsanddividendreceived 8, 000

.Calculate the value of goodwill. Also, calculate the goodwill brought in by Ramesh.

By: NIHARIKA WALIA