R and S were partners sharing profits in the ratio of 2 : 1 respectively. After all adjustments, R's Capital is ₹1,02,000 and S's Capital is ₹73,000. They admitted M and agreed to give him 1/5th share in future profit. M brought ₹14,000 as his share of goodwill. He also agreed to contribute capital in the new profit sharing ratio. How much capital would be brought by M?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹43,750.
After all adjustments, R's Capital is ₹1,02,000 and S's Capital is ₹73,000.
Thus, Total Capital of R & S = 1,02,000 + 73,000
= ₹1,75,000
Total share = 1
M' share = 1/5
Share of R and S in new firm = 1-1/5
= (5-1)/5
= 4/5
For the 4/5th share of R & S, capital is ₹1,75,000.
Total Capital of firm on the basis of share of R & S = 1,75,000 x 5/4
= 2,18,750
Share of M in capital = 1/5 x 2,18,750
= 43,750
Thus, capital brought by M was ₹43,750.