M, N and S are partners in a firm sharing profit in the ratio of 2 :1: 1 N retires and M and S are decided that capital of the new firm will be fixed at ₹1,20,000. Calculate the new capital of remaining partners.

M's capital ₹80,000, S's capital ₹40,000

The correct answer is option 3- M's capital ₹80,000, S's capital ₹40,000.

Old ratio between M, N & S = 2:1:1
N retires
So the New ratio between M & S = 2:1

Capital = ₹1,20,000
This will be distributed between Remaining partners in their new ratio means 2:1
M's share = 1,20,000 x 2/3
                = ₹80,000
S's share = 1,20,000 x 1/3
                = ₹40,000