X,Y & Z are partners sharing profits equally. Z retired from the firm. After adjustment, his capital account shows a credit balance of ₹1,00,000 on 1st April 2021. Z is to be paid ₹37,500 each year in 2 equal installments including interest @10%p.a. on the outstanding balance of each year. The balance is paid in 3rd year. What is the balance that is paid in 3rd year?

₹46,475

The correct answer is option 2- ₹46,475.

₹1,00,000 is to be paid to Z
In 1st year interest = 1,00,000*10/100
                               = 10,000
Amount to be paid in 1st year ₹37,500.
After this balance = ₹1,10,000 - 37,500
                             = ₹72,500

In 2nd year interest = 72,500 x 10/100
                                 = 7,250
Amount to be paid in 2nd year = ₹37500.
After this balance =  ₹79,750 - 37,500
                            = ₹42,250

In 3rd year interest = 42,250 x 10/100
                                = 4,225
So, amount to be paid in last year = 42,250 + 4,225
                                                      = ₹46,475