Multiple choice

X and Y are partners in a partnership firm sharing profits in the ratio of 5:3 with a capital of Rs. 5,00,000 & Rs. 4,00,000 respectively. Z was admitted on the following terms: Z would pay Rs. 100,000 as capital and Rs. 32,000 as Goodwill, for a 1/5th share of profit. The balances of capital accounts after the admission of Z will be in the ratio of _______.

  1. 5,20,000 : 4,12,000 : 1,00,000

  2. 5,00,000 : 4,00,000 : 1,00,000

  3. 5,12,000 : 4,20,000 : 1,00,000

  4. None of these
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A Correct answer
Explanation

Z brings 100,000 capital and 32,000 goodwill. The goodwill is distributed to X and Y in their ratio 5:3. X gets 20,000, Y gets 12,000. New capital X = 500,000 + 20,000 = 520,000. New capital Y = 400,000 + 12,000 = 412,000. Z = 100,000.

AI explanation

Z joins with a capital of Rs. 1,00,000 and pays Rs. 32,000 as goodwill. Since the new profit sharing ratio is not provided, the sacrificing ratio is assumed to be the old profit sharing ratio of 5:3. Therefore, the goodwill premium of Rs. 32,000 is distributed to X and Y, adding Rs. 20,000 to X's account and Rs. 12,000 to Y's account. The final capital balances become Rs. 5,20,000 for X, Rs. 4,12,000 for Y, and Rs. 1,00,000 for Z.

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