Multiple choice

Akshay and Ajay are partners. Their capital account balances after all adjustments in respect of goodwill, reserves and revaluation profits are Rs. 2,50,000 and Rs. 1,50,000, respectively. Varun is admitted as a new partner for 1/5th share in future profits. He is required to bring proportionate capital to his share in future profits. Calculate the amount of capital to be brought by Varun.

  1. Rs. 80,000

  2. Rs. 5,00,000

  3. Rs. 1,00,000

  4. Rs. 4,00,000

  5. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Total capital of existing partners = 250000 + 150000 = 400000. This represents 4/5 of the total firm capital (since Varun takes 1/5). Total firm capital = 400000 * (5/4) = 500000. Varun's share = 1/5 * 500000 = 100000.

AI explanation

The total adjusted capital of the existing partners is 250000 + 150000 = 400000. This amount represents 4/5 of the total capital of the newly formed partnership since the new partner is acquiring a 1/5 share. To find the total capital, multiply 400000 by 5/4, resulting in 500000. The capital Varun must bring is his 1/5 share of this total, calculated as 1/5 of 500000, which equals 100000.

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