Goodwill of a firm of X and Y is valued at Rs. 30,000. It is appearing in the books at Rs. 12,000. Z is…

The correct choice is: Rs. 7,500

Under the premium method, goodwill already standing in the books is written off among the old partners in their old profit-sharing ratio, and the incoming partner brings his share of the full current value of goodwill. Z’s share = 1/4 × Rs. 30,000 = Rs. 7,500.

Rs. 3,000 is only 1/4 of the book figure of Rs. 12,000, which is not the value of goodwill. Rs. 4,500 is 1/4 of the difference (Rs. 30,000 − Rs. 12,000 = Rs. 18,000); that figure would apply only if the existing book goodwill were kept in the books, but here it is written off. Rs. 10,500 wrongly adds Rs. 3,000 and Rs. 7,500.