Read the following information to answer.

Arun and Ram are partners in a restaurant business sharing profits and losses in capital ratio. Their fixed capital from the beginning of the firm was ₹2,00,000 and ₹1,50,000 respectively.

The profit for the year ended 31 March 2022 before the appropriation of Salary and Interest on Capital was ₹2,20,000. Ram is allowed a salary of ₹ 2,000 per quarter and interest on capital @ 10% p.a.

Due to the further expansion of the business, they decided to enter Sanjeev as a new partner for 1/5 share in profits. It was agreed that Sanjeev will bring ₹1,00,000 as capital and ₹50,000 as his share of Goodwill. It was decided that he will give ₹1,00,000 as loan to the firm for 3 years.

The amount of distributed profits of both the partner's will be:

₹1,77,000

The correct answer is option 1- ₹1,77,000.

Profit before appropriations                                                          = ₹2,20,000
Less: Interest on capital
         Arun = 2,00,000 x 10/100 = 20,000
         Ram = 1,50,000 x 10/100 = 15,000                                      = 35,000
Less: salary to Ram (2000 x4)                                                       = 8,000
Distributed profit =                                                                     = ₹1,77,000