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Question
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A, B and C were in partnership sharing profits and losses in the proportions of 3 : 2 : 1. On 1st April, 2024, B retires from the firm and A and C decided to share future profits in the ratio of 3 : 2. On that date their capitals were as follows: A ₹ 1,77,000; B ₹ 1,70,000 and C ₹ 1,23,000. Loss on revaluation of assets amounted to ₹ 30,000. Amount due to B was paid on this date by giving him 40,000 over and above the amount due to him. As per partnership deed, partners are allowed 6% p.a. interest on their capitals. Profit for the year ending 31st March 2025 before allowing interest on capitals amounted to ₹ 10,000. |
On the basis of above information, answer the following question:
Interest on Capital allowed to partner's will be:
Options
A ₹ 9,000 and C ₹ 5,400
A ₹ 10,620 and C ₹ 7,380
A ₹ 6,250 and C ₹ 3,750
No interest will be allowed
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Solution
A ₹ 6,250 and C ₹ 3,750
Explanation:
| A (₹) | C (₹) | |
| Capitals | 1,77,000 | 1,23,000 |
| Less: Loss on Revaluation | (15,000) | (5,000) |
| Less: Goodwill | (12,000) | (28,000) |
| Adjusted Capitals on 1st April 2019 | 1,50,000 | 90,000 |
| ₹ | |
| Interest on A's Capital 6% on 1,50,000 | 9,000 |
| Interest on C's Capital 6% on 90,000 | 5,400 |
| 14,400 |
The available profit is ₹ 10,000 whereas the interest due on capitals is ₹ 4,400. Since the profit is less than interest, the available profit will be distributed in the ratio of interest, i.e., 9,000 : 5,400 or 5 : 3.
Interest on Capital Allowed to A = `10,000xx5/8` = ₹ 6,250
Interest on Capital Allowed to C = `10,000xx3/8` = ₹ 3,750
