S and t were partners in a firm sharing profit in the raito 5:3:2 with...
Introduction
S and t were partners in a firm sharing profit in the ratio 5:3:2 with capital 50000,24000,26000 respectively. Partners for were entitled 6% per annum. R and S guaranteed that his share of profit in any year could not be less than 10000 excluding interest. During the year the firm had earned a profit of 48000 before charging the interest on capital.
Calculation of Interest on Capital
The total capital of the firm is 100000. Therefore, the interest on capital at 6% per annum for the year is:
Interest on S's capital = 50000 x 6% = 3000
Interest on T's capital = 24000 x 6% = 1440
Interest on R's capital = 26000 x 6% = 1560
Total interest on capital = 3000 + 1440 + 1560 = 6000
Distribution of Profit
The total profit earned by the firm is 48000. After deducting the interest on capital, the remaining profit is:
Remaining profit = 48000 - 6000 = 42000
According to the profit-sharing ratio, S's share of profit is 5/10 of the remaining profit, T's share is 3/10, and R's share is 2/10. Therefore:
S's share of profit = 5/10 x 42000 = 21000
T's share of profit = 3/10 x 42000 = 12600
R's share of profit = 2/10 x 42000 = 8400
Verification of Guaranteed Minimum Profit
As per the agreement, R and S guaranteed that his share of profit in any year could not be less than 10000 excluding interest. Let's verify if this condition is met in this case:
S's share of profit = 21000
T's share of profit = 12600
R's share of profit = 8400
As we can see, all partners' share of profit is more than the guaranteed minimum of 10000. Therefore, the condition is met.
Conclusion
In this case, we calculated the interest on capital, distributed the remaining profit according to the profit-sharing ratio, and verified if the guaranteed minimum profit condition is met. All partners received more than the guaranteed minimum, and the distribution of profit was done according to the agreed upon ratio.