A and B are partners sharing profits in the ratio of 2:1. C is admitted into the firm for 1/4 share of profits. C brings in ₹20,000 in respect of his capital. The capitals of old partners A and B, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are ₹45,000 and ₹15,000 respectively. It is agreed that partners' capitals should be according to the new profit sharing ratio. A's Capital in the new firm will be:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹40,000.
Let Total Share = 1
C’s Share = 1/4
Remaining Share = 1- 1/4
= 3/4
A’s New Share = 3/4 x 2/3
= 6/12
B’s New Share = 3/4 x 1/3
= 3/12
New ratio = 6/12 : 3/12 : 1/4
= 6/12 : 3/12 : 3/12
= 6:3:3 or 2:1:1
C's capital = 20,000
Based on C’s capital, the total capital of the firm = 20,000 x 4/1
= 80,000
A’s capital = 80,000 x 2/4
= 40,000