Question

C was admitted in a firm with 1/4th share of the profits of the firm. C contributes Rs. 37,500 as his capital, A and B are other partners with the profit sharing ratio as 3:2. Find the required capital of A and B, if capital should be in profit sharing ratio taking C's as base capital.

• A. Rs. 67,500 and Rs. 40,000 for A and B respectively.
• B. Rs. 67,500 and Rs. 45,000 for A and B respectively.
• C. Rs. 80,000 and Rs. 52,500 for A and B respectively.
• D. Rs. 77,500 and Rs. 65,000 for A and B respectively.

Answer 1

Answer: (B)

Rs. 67,500 and Rs. 45,000 for A and B respectively.

The old ratio of A & B is 3:2 but on admission of partner, a new ratio is calculated as under;

$Newratio=Oldratio\times Remainingshare$

A's new ratio= $\frac{3}{5}\times \frac{3}{4}=\frac{9}{20}$

B's new ratio= $\frac{2}{5}\times \frac{3}{4}=\frac{6}{20}$

New ratio of A:B:C is $\frac{9}{20}:\frac{6}{20}:\frac{1}{4}=\frac{9}{20}:\frac{6}{20}:\frac{5}{20}$

Total capital is calculated using the formula given below

$Totalcapital=Newpartne{r}^{\prime }scapital÷Hisshare$

Substitute values in the above equation

$Totalcapital=Rs37,500÷\frac{1}{4}=Rs37,500\times 4=Rs1,50,000$

A's capital share$=Rs1,50,000\times \frac{9}{20}=Rs67,500$

B's capital share$=Rs1,50,000\times \frac{6}{20}=Rs45,000$.