Question

X, Y and Z are partners sharing profits in the ratio of 5 : 3 : 2. Y retires on 1st April, 2018 from the firm, on which date capitals of X, Y and Z after all adjustments are ₹ 1,03,680, ₹ 87,840 and ₹ 26,880 respectively. The Cash and Bank Balance on that date was ₹ 9,600. Y is to be paid through amount brought in by X and Z in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be X 3/5 and Z 2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank Balance of ₹ 7,200 was to be maintained and pass the necessary journal entries.

Answer 1

Z has to bring = 86,400−26,880=Rs 59,520  

Explanation:

Total capital of firm before retirement = 1,03,680+87,840+26,880 = Rs 2,18,400

Availability of cash = 9,600 - 7,200 (Minimum Balance) = Rs 2,400

Combined new capital of X and Z=Rs 2,16,000

X's new capital = 2,16,000×35=Rs 1,29,600

Existing capital of X= Rs 1,03,680

So, X has to bring = 1,29,600−1,03,680= Rs 25,920

Z's new capital = 2,16,000×25=Rs 86,400

Existing capital of Z = Rs 26,880

So, Z has to bring = 86,400−26,880=Rs 59,520