X and Y have capitals of Rs. 20,000 and Rs. 10,000 respectively and share profits and losses equally. On dissolution of firm all creditors are paid off and a balance of cash left is Rs. 5,000. It will be distributed as follows :

Rs. 5,000 to X

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Rs. 5,000 to Y

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Rs. 2,500 each to X and Y

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Rs. 3,333 to A and Rs. 1,667 to B

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Solution

The correct option is A Rs. 5,000 to X
According to piecemeal distribution of cash, partners whose capitals are more than proportionate to other partner's capital should first be refunded to bring down their capitals to proportionate levels. After that amount left unpaid be shared in profit sharing ratio. In this, X and Y share profits and losses equally. So their capitals should also be equal. To make capital equal X will be paid first. So Rs. 5000 will be paid to X.

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