Question
Download Solution PDFMohan, Rahul, and Geeta enter into a partnership. They invest ₹35,000, ₹75,000, and ₹1,05,000, respectively. At the end of the first year, Rahul withdraws ₹25,000, while at the end of the second year, Geeta withdraws ₹75,000. In what ratio will the profit be shared at the end of 3 years?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Mohan's initial investment = ₹35,000
Rahul's initial investment = ₹75,000
Geeta's initial investment = ₹1,05,000
At the end of 1st year, Rahul withdraws ₹25,000.
At the end of 2nd year, Geeta withdraws ₹75,000.
Total partnership period = 3 years.
Concept:
Profit sharing ratio in a partnership is determined by the product of the investment and the time period for which the investment was made.
If investments change during the period, the equivalent investment for the entire period is calculated as (Investment1 × Time1) + (Investment2 × Time2) + ...
Calculation:
Calculate the effective investment for each partner over 3 years (36 months).
Mohan's investment:
Mohan's investment remains constant for 3 years.
Mohan's effective investment = ₹35,000 × 3 years = ₹1,05,000
Rahul's investment:
For the first year (12 months), Rahul invested ₹75,000.
At the end of the first year, Rahul withdraws ₹25,000.
Remaining investment for the next 2 years (24 months) = ₹75,000 - ₹25,000 = ₹50,000.
Rahul's effective investment = (₹75,000 × 1 year) + (₹50,000 × 2 years)
= ₹75,000 + ₹1,00,000
= ₹1,75,000
Geeta's investment:
For the first two years (24 months), Geeta invested ₹1,05,000.
At the end of the second year, Geeta withdraws ₹75,000.
Remaining investment for the third year (12 months) = ₹1,05,000 - ₹75,000 = ₹30,000.
Geeta's effective investment = (₹1,05,000 × 2 years) + (₹30,000 × 1 year)
= ₹2,10,000 + ₹30,000
= ₹2,40,000
Ratio of Profits:
Mohan : Rahul : Geeta
= ₹1,05,000 : ₹1,75,000 : ₹2,40,000
= 105 : 175 : 240
= 21 : 35 : 48 ⇒ = 21 × 3 : 35 × 3 : 48 × 3
= 63 : 105 : 144
∴ The correct answer is option 3.
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