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CMA Intermediate · Financial Accounting · Admission of Partner

S and T are partners sharing profits equally, with capitals of Rs 2,00,000 each. U is admitted for a 1/3 share and brings Rs 1,50,000 as capital. The firm's total capital after admission is to be based on U's contribution, and goodwill and revaluation are ignored. What is the required capital of each old partner, assuming they share the remaining profit equally?

Each old partner's required capital is Rs 1,50,000. U's Rs 1,50,000 for a one-third share implies total capital of Rs 4,50,000, and S and T each hold one-third. Both currently have Rs 2,00,000, so each would withdraw Rs 50,000 to reach the required balance.

  1. ARs 1,50,000Correct
  2. BRs 2,25,000
  3. CRs 3,00,000
  4. DRs 1,00,000

Explanation

U's Rs 1,50,000 for 1/3 implies total capital Rs 4,50,000. S and T each hold 1/3, so each needs Rs 1,50,000. Each currently has Rs 2,00,000, so each withdraws Rs 50,000. Rs 2,25,000 wrongly splits the total capital between S and T only.

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