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CMA Intermediate · Financial Accounting · Dissolution of Partnership Firms including Piecemeal Distribution

Ravi, Sunil and Tarun share profits equally. Their capitals are Rs 90,000, Rs 60,000 and Rs 30,000, and Tarun has also lent Rs 12,000 to the firm. Outside creditors are Rs 30,000. In the first instalment assets are realised for Rs 100,000 and realisation expenses of Rs 10,000 are paid. The firm then distributes all available cash, applying Section 48 priorities and the proportionate capital method for capital. What total amount does Tarun receive in this instalment?

Tarun receives Rs 20,000. After expenses and creditors, Rs 60,000 is available. His Rs 12,000 loan ranks ahead of capital, leaving Rs 48,000 to be shared 3:2:1, which gives him Rs 8,000 more. His total is Rs 12,000 plus Rs 8,000.

  1. ARs 8,000
  2. BRs 10,000
  3. CRs 20,000Correct
  4. DRs 28,000

Explanation

Cash available is 100,000 - 10,000 - 30,000 = 60,000. Tarun's loan of Rs 12,000 is paid before capital, leaving 48,000 for capital in the ratio 90:60:30 = 3:2:1. Tarun's capital share is 48,000 x 1/6 = 8,000, so the total is 12,000 + 8,000 = 20,000. Rs 8,000 omits the loan, and Rs 10,000 wrongly divides the 60,000 equally.

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