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CMA Intermediate · Financial Accounting · Admission of Partner

X and Y share profits equally with capitals of Rs 3,00,000 and Rs 2,00,000. Z is admitted for a 1/3 share and brings Rs 2,50,000 as capital. Goodwill is not involved and no revaluation arises. Z's capital is taken as the base, and the old partners' capitals are to be adjusted to agree with the new profit-sharing ratio, with X and Y sharing the remaining 2/3 equally. How much cash will X bring in or withdraw?

X withdraws Rs 50,000. Z's Rs 2,50,000 for a one-third share implies total capital of Rs 7,50,000, so X and Y should each hold Rs 2,50,000. X currently holds Rs 3,00,000, so the excess of Rs 50,000 is withdrawn, while Y has to bring in Rs 50,000.

  1. AX withdraws Rs 50,000Correct
  2. BX brings Rs 50,000
  3. CX withdraws Rs 1,00,000
  4. DX brings Rs 1,00,000

Explanation

Z's Rs 2,50,000 for 1/3 implies total capital of Rs 7,50,000. X's required capital is 1/3 x 7,50,000 = Rs 2,50,000, and Y's is the same. X has Rs 3,00,000, so X withdraws Rs 50,000. Y has Rs 2,00,000, so Y brings Rs 50,000.

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