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Question
X and Y are partners in a firm with capital of ₹ 18,000 and ₹ 20,000. Z brings ₹ 10,000 for his share of goodwill, and he is required to bring proportionate capital for `1/3`rd share in profits. The capital contribution of Z will be ______.
Options
₹ 24,000
₹ 19,000
₹ 12,667
₹ 14,000
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Solution
X and Y are partners in a firm with capital of ₹ 18,000 and ₹ 20,000. Z brings ₹ 10,000 for his share of goodwill, and he is required to bring proportionate capital for `1/3`rd share in profits. The capital contribution of Z will be ₹ 24,000.
Explanation:
Determine the Sacrificing Ratio and Adjust Capitals for Goodwill:
The initial profit-sharing ratio of X and Y is not specified, so we assume they share profits equally.
Z brings ₹ 10,000 as goodwill premium.
X’s share of goodwill = `10,000 xx 1/2`
= 5,000
Y’s share of goodwill = `10,000 xx 1/2`
= 5,000
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