Read the following passage and answer the following question.
A, B & C are partners sharing profits in proportion to their capital. A retired from the firm on 1st April 2021 and the remaining partners decided to carry on the partnership with a profit-sharing ratio of 4:3. At the time of retirement, their capital accounts show balance- A- ₹2,00,000, B- ₹3,00,000, and C ₹2,00,000. The assets and liabilities of the partnership firm are as follows-
Creditors- ₹50,000
General reserve- ₹35,000
Workmen Compensation fund ₹15,000
Cash balance- ₹1,00,000
Stock- ₹1,00,000
Machinery- ₹3,00,000
Land- ₹2,00,000
Debtors after provision for doubtful debts (10,000)= ₹1,00,000
Capitals of the firm in total will be the same as before the retirement of A and will be in the new profit-sharing ratio of the continuing partners. What will be the capital of the remaining partner( B & C) respectively?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹4,00,000, ₹3,00,000.
Capital of partners = A- ₹2,00,000, B- ₹3,00,000, and C ₹2,00,000
Total capital of the firm = ₹7,00,000
B's capital in new firm = 7,00,000 x 4/7
= ₹4,00,000
C's capital in new firm = 7,00,000 x 3/7
= ₹3,00,000