Question

______ goodwill is the excess of desired total capital of the firm over the actual combined capital of all partners.

• A. Existing
• B. Premium
• C. Valued
• D. Hidden

Hint:

Hidden goodwill arises when no goodwill is shown but can be inferred from capital contributions and profit-sharing.

Answer 1

The Correct Option is D

Step 1: Concept Clarification.
Hidden goodwill is an unrecorded value determined by contrasting implied capital with actual capital. 
Step 2: Calculation Formula: \[ \text{Hidden Goodwill} = \text{Total Capital of the Firm (based on share)} - \text{Combined Actual Capital} \] 
Step 3: Practical Example. 
When a new partner contributes capital proportionate to their ownership stake, and the firm's total capital derived from this share surpasses the combined actual capital, the surplus represents hidden goodwill.