Multiple choice

Kumar and Sharma are partners sharing profits and losses in ratio 2 : 1, respectively. Gupta is admitted as a new partner for 1/4th share who brings Rs. 1,25,000 as capital. The capital accounts of the old partners are to be maintained according to their share in future profits. How much should be the capitals of Kumar and Sharma, respectively?

  1. Rs. 2,50,000 and Rs. 1,25,000

  2. Rs. 1,25,000 and Rs. 2,50,000

  3. Rs. 1,87,500 each

  4. Rs. 2,50,000 each

  5. None of these
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A Correct answer
Explanation

Gupta gets 1/4 share for 1,25,000. Total capital of the firm = 1,25,000 * 4 = 5,00,000. Remaining share for Kumar and Sharma is 3/4. Their ratio is 2:1. Kumar's capital = (2/3) * (3/4) * 5,00,000 = 2,50,000. Sharma's capital = (1/3) * (3/4) * 5,00,000 = 1,25,000.

AI explanation

Since Gupta receives a one-fourth share, the remaining three-fourths share is retained by Kumar and Sharma in their old 2 to 1 ratio, making their new profit sharing ratio 2 to 1 to 1. To maintain their capital accounts according to future profits, Kumar's capital should be twice Gupta's, which is 250000, and Sharma's capital should match Gupta's, which is 125000.

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