Partnership between A and B, each having capital ₹100,000, profit share 2:1. After 4 years, new partner C joins with ₹30,000 capital. Partners agree that C will receive 10% interest on his capital for the period he is admitted, and profit share ratio will be 3:2:1 (A:B:C). Compute (i) C’s total interest payable, and (ii) profit share of each partner after admission.
Answer
Interest payable to C is ₹12,000. Profit share: A gets 50% of profit, B gets 33.33% (1/3), C gets 16.67% (1/6).
The correct answer is Interest payable to C is ₹12,000. Profit share: A gets 50% of profit, B gets 33.33% (1/3), C gets 16.67% (1/6). — C’s share = 1/6 = 16.67% of profit.
Step-by-step solution
- Interest on C’s capital: ₹30,000 × 10% × 4 years = ₹12,000.
- Total profit shares after admission = 3+2+1 = 6 parts.
- A’s share = 3/6 = 50% of profit.
- B’s share = 2/6 = 33.33% of profit.
- C’s share = 1/6 = 16.67% of profit.
Common mistake: Forgetting to calculate interest or mixing up profit share ratio with capital ratio
Concept tested: Interest on capital and profit share after admission
Published · How this solution was prepared and checked
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