The value of goodwill is determined based on the net worth or total capital of the firm. The total capital of the firm is calculated as the capital of the new partner multiplied by the reciprocal of their share. Goodwill is then calculated as the total capital minus the combined capital contributions of all partners. Any accumulated losses or reserves are shared by the old partners in their original profit sharing ratios through journal entries that debit the relevant accounts and credit the partners' capital accounts.