Question

X, Y and Z are partners sharing profits in the ratio of 5 : 3 : 2. Y retires on 1st April, 2019 from the firm, on which date capitals of X, Y and Z after all adjustments are ₹ 1,03,680, ₹ 87,840 and ₹ 26,880 respectively. The Cash and Bank Balance on that date was ₹ 9,600. Y is to be paid through amount brought in by X and Z in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be X 3/5 and Z 2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank balance of ₹ 7,200 was to be maintained and pass the necessary Journal entries.

Answer 1

Total capital offirm before retirement = `1,03,680 + 87,840 + 26,880 = "Rs" 2,18,400`

Availability of cash = `9,600 - 7,200 ("minimum balance") = "Rs" 2,400`

Combined new capital of X and Z = `"Rs" 2,16,000`

X's new capital = `2,16,000 xx 3/5 = "Rs" 1,29,600`

Existing capital of X = `"Rs" 1,03,680`

So, X has to bring = `1,29,600 - 1,03,680 = "Rs" 25,920`

Z's new capital = `2,16,00 xx 2/5 = "Rs" 86,400`

Existing capital of Z = `"Rs" 26,880`

So, Z has to bring = `86,400 - 26,880 = "Rs" 59,520`