Abhay and Beena are partners in a firm. They Chetan as a partner with 1/4th share in the profits of the firm. Chetan brings RS. 2,00,000 as his share of capital. Value of the total assets of the firm is RS. 5,40,000 and outside liabilites are valued at RS. 1,00,000 on that date. Give necessary entry to record goodwill at the time of Chetan's admission. Also show your working notes.

Explanation

`{:("Calcualtion of Hidden Goodwill",RS.),(A."Net worth of new firm on the basis of capital brought in by Chetan,(RS.2,00,"000xx4//1")","8,00,000"),(B."Less: Net worth (excluding goodwill)new firm (Adjusted capital of old pratners+Incoming Partner's Capital)[(RS.5,40,000-RS.1,00,000)+RS.2,00,0000]",underline"(6,40,000)"),("Value of firm's Goodwill(A-B)",underline underline"1,60,000)"):}
Thus, Chetan's share of Goodwill `RS.1,60,000xx1//4=RS.40,000`.