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 T's deficiency in profits?
- ARs. 20,000
- BRs. 30,000
- CRs. 40,000
- DRs. 57,000
Solution & Step-by-step Explanation
Let's track the divisible profit pool details:Base Profit = Add: A's performance deficiency input = Less: Combined Interest on Capital = Total Divisible Profit Pool = Now, calculate T's initial profit allocation based on their standard profit-sharing ratio:
Since T was promised a guaranteed profit floor of , we find the deficiency:
Since T was promised a guaranteed profit floor of , we find the deficiency: