A and B share profits and losses in the ratio of 2: 1. They admit C as partner with 1/4th share in profits with a guarantee that his share of profit shall be at least ₹50,000. The net profit of the firm for the year ending March 31st, 2022 was ₹2,40,000, Determine C's share in profits.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹60,000
A and B share profits and losses in the ratio of 2 : 1.
C is admitted with a 1/4th share in profits.
Let total share = 1
C's share = 1/4
Remaining share = 1-1/4
= 3/4
This 3/4 share is shared between A & B in 2:1
A's new share = 2/3 x 3/4
= 6/12
B's new share = 1/3 x 3/4
= 3/12
New ratio between A, B & C = 6/12 : 3/12 : 1/4
= 6/12 : 3/12 : 3/12
= 6:3:3
= 2:1:1
C's share of profit is guaranteed to be at least 50,000.
C's share in profit = 2,40,000 x 1/4
= 60,000
As Actual profit is more than guaranteed profit then actual profit is given to C.