A, V and T were partners of a law firm sharing profits in the ratio of 5:3:2. Their partnership deed provided the following:(i) Interest on partners’ capital @ 5% p.a.(ii) A guaranteed that he would earn a minimum annual fee of Rs. 6,00,000 for the firm.(iii) T was guaranteed a profit of Rs. 2,50,000 (excluding interest on capital) and any deficiency on account of this was to be borne by A and V in the ratio of 2:3.During the year ending March 31, 2019, A earned a fee of Rs. 3,20,000 and net profits earned by the firm were Rs. 8,60,000. Partner’s capital on April 01, 2018 were A - Rs. 3,00,000; V - Rs. 3,00,000 and T - Rs. 2,00,000.What is the amount of profit to be credited to A's Capital account?
- ARs.5,28,000
- BRs.5,30,000
- CRs.5,35,000
- DRs.5,38,000
Solution & Step-by-step Explanation
Let's prepare the Profit & Loss Appropriation calculations systematically:Calculate total adjusted profits available for sharing:Starting Net Profit = Add: A’s fee deficiency payment to the firm = Less: Interest on Capital (IoC) at p.a.:A: V: T: Total IoC = $
5:3:2 11,00,000 \times \frac{5}{10} = \text{Rs. } 5,50,000 11,00,000 \times \frac{3}{10} = \text{Rs. } 3,30,000 11,00,000 \times \frac{2}{10} = \text{Rs. } 2,20,000 \text{Rs. } 2,50,000 \text{Rs. } 2,20,000 2,50,000 - 2,20,000 = \text{Rs. } 30,000 \text{Rs. } 30,000 2:3 30,000 \times \frac{2}{5} = \text{Rs. } 12,000 $
5:3:2 11,00,000 \times \frac{5}{10} = \text{Rs. } 5,50,000 11,00,000 \times \frac{3}{10} = \text{Rs. } 3,30,000 11,00,000 \times \frac{2}{10} = \text{Rs. } 2,20,000 \text{Rs. } 2,50,000 \text{Rs. } 2,20,000 2,50,000 - 2,20,000 = \text{Rs. } 30,000 \text{Rs. } 30,000 2:3 30,000 \times \frac{2}{5} = \text{Rs. } 12,000 $