Partners M and N have capitals ₹90,000 and ₹110,000 respectively, with a profit‑sharing ratio of 3:2. After 5 years, partner O joins with ₹30,000 capital. The partners agree that O will receive interest at 9% per annum on his capital for the period he is admitted, and the new profit ratio will be 5:3:2 (M : N : O). If the partnership makes a profit of ₹60,000 during the year of admission, calculate (i) the total interest payable to O, (ii) the profit share of each partner after admission, and (iii) the change in profit‑sharing percentages for each partner compared to the original partnership.
Answer
Interest ₹2,700; Profit shares – M ₹30,000, N ₹18,000, O ₹12,000; Percentage changes – M –10 pp, N –10 pp, O +20 pp
The correct answer is Interest ₹2,700; Profit shares – M ₹30,000, N ₹18,000, O ₹12,000; Percentage changes – M –10 pp, N –10 pp, O +20 pp — Calculate changes: M –10 pp, N –10 pp, O +20 pp.
Step-by-step solution
- Interest on O: ₹30,000 × 9% × 1 = ₹2,700.
- Total ratio after admission: 5+3+2 = 10.
- Compute M’s share: (5/10) × ₹60,000 = ₹30,000.
- Compute N’s share: (3/10) × ₹60,000 = ₹18,000.
- Compute O’s share: (2/10) × ₹60,000 = ₹12,000.
- Determine original percentages: M 3/(3+2)=60%, N 40%.
- Determine new percentages: M 50%, N 30%, O 20%.
- Calculate changes: M –10 pp, N –10 pp, O +20 pp.
Common mistake: Using old profit ratio for new profit calculation
Concept tested: Reconstitution and percentage changes
Published · How this solution was prepared and checked
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