Question

Kajal and Laura were partners in a firm sharing profits and losses in the ratio of 5:3. They admitted Maddy for \( \frac{1}{4} \)th share in future profits. Maddy brought Rs 8,00,000 as his capital and Rs 4,00,000 as his share of premium for goodwill. Kajal, Laura and Maddy decided to share profits in future in the ratio of 2:1:1. After all adjustments in respect of goodwill, revaluation of assets and liabilities etc. Kajal's capital was Rs 15,00,000 and Laura's capital was Rs 8,00,000. It was agreed that partners' capitals should be in proportion to their new profit sharing ratio taking Maddy's capital as base. The adjustment was made by bringing in or withdrawing the necessary cash as the case may be. The cash brought in by Kajal was:

• A. Rs 1,00,000
• B. Rs 8,00,000
• C. Rs 16,00,000
• D. Rs 12,00,000

Hint:

For capital adjustments based on a new partner's capital: 1. Calculate the total capital of the new firm using the new partner's capital and their profit share. 2. Determine the required capital for each partner by distributing the total capital in the new profit-sharing ratio. 3. Compare the required capital with the existing adjusted capital (after all adjustments like goodwill, revaluation, reserves) for each old partner. 4. The difference indicates cash to be brought in (if required $>$ existing) or withdrawn (if existing $>$ required).

Answer 1

The Correct Option is A

1.Calculate the total capital of the new firm based on Maddy's capital and the new PSR:
Maddy's Capital = Rs 8,00,000 for a \( \frac{1}{4} \) share (New ratio 2:1:1 means Maddy's share is \( \frac{1}{2+1+1} = \frac{1}{4} \)).
Total Capital of the New Firm = Maddy's Capital \( \times \) Reciprocal of his share \[ \text{Total Capital} = 8,00,000 \times \frac{4}{1} = Rs 32,00,000 \] 2. Calculate the required capital for each partner based on the new PSR and total capital:
New PSR = Kajal : Laura : Maddy = 2 : 1 : 1. Kajal's Required Capital = Total Capital \( \times \) Kajal's New Share \[ \text{Kajal's Required Capital} = 32,00,000 \times \frac{2}{4} = Rs 16,00,000 \] Laura's Required Capital = Total Capital \( \times \) Laura's New Share \[ \text{Laura's Required Capital} = 32,00,000 \times \frac{1}{4} = Rs 8,00,000 \] Maddy's Required Capital = Total Capital \( \times \) Maddy's New Share \[ \text{Maddy's Required Capital} = 32,00,000 \times \frac{1}{4} = Rs 8,00,000 (Matches his contribution) \] 3. Compare Kajal's required capital with her existing adjusted capital:
Kajal's Existing Adjusted Capital (after all adjustments for goodwill, revaluation etc.) = Rs 15,00,000.
Kajal's Required Capital = Rs 16,00,000. 4. Calculate the cash to be brought in or withdrawn by Kajal:
Cash Adjustment for Kajal = Required Capital - Existing Adjusted Capital \[ \text{Cash Adjustment for Kajal} = 16,00,000 - 15,00,000 = Rs 1,00,000 \] Since the required capital is more than the existing capital, Kajal needs to bring in cash. Cash brought in by Kajal = Rs 1,00,000.