Two partners, A and B, have a partnership with capital balances of ₹5,00,000 and ₹3,00,000 respectively. Partner B retires and agrees to buy‑out at book value. The partnership’s profit for the year is ₹1,20,000 and the partners share profits in the ratio 3:2. What is the amount payable to B upon retirement?
Answer
₹3,48,000
The correct answer is ₹3,48,000 — Thus B will receive ₹3,48,000 upon retirement.
Step-by-step solution
- Compute B’s share of profit: ₹1,20,000 × ×2/(3+2) = ₹48,000.
- Add B’s share of profit to his capital balance: ₹3,00,000 + ₹48,000 = ₹3,48,000.
- Thus B will receive ₹3,48,000 upon retirement.
Common mistake: Forgetting to add profit share to the capital balance
Concept tested: Buy‑out at book value
Published · How this solution was prepared and checked
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