Question 84

Ram and Shyam form a partnership (with Shyam as working partner) and start a business by

investing 4000 and 6000 respectively. The conditions of partnership were as follows:

1. In case of profits till 200,00 per annum, profits would be shared in the ratio of the invested capital.

2.Profits from 200,001 till 400,000 Shyam would take 20% out of the profit, before the division of remaining profits, which will then be based on ratio of invested capital.

3.Profits in excess of 400,000, Shyam would take 35% out of the profits beyond 400,000, before the division of remaining profits, which will then be based on ratio of invested capital.

If Shyam’s share in a particular year was 367000, which option indicates the total business

profit (in ) for that year?

Solution

Ratio of profits earned by Ram : Shyam = 4000 : 6000

= 2 : 3

If profit < 2,00,000

% of profit earned by Shyam = $$\frac{3}{5} \times$$ 100 = 60%

If 2,00,000 < profit < 4,00,000, he gets 20 % and 60 % of the remaining profit.

% of profit earned by Shyam = 20% + .80 $$\times$$ 60% = 68%

If profit > 4,00,000

% of profit earned by Shyam = 35 % + .65 $$\times$$ 60% = 74%

Now, for first 2,00,000 profit earned by Shyam = $$\frac{60}{100} \times$$ 2,00,000 = Rs. 1,20,000

For second 2,00,000 profit earned by Shyam = $$\frac{68}{100} \times$$ 2,00,000 = Rs. 1,36,000

Let total profit earned by them = Rs. (4,00,000 + $$x$$)

=> From $$Rs. x$$ profit, Shyam received = 3,67,000 - 1,20,000 - 1,36,000 = Rs. 1,11,000

=> $$\frac{74}{100} \times x$$ = 1,11,000

=> $$x$$ = 1,11,000 $$\times \frac{100}{74}$$ = 1,50,000

$$\therefore$$ Total profit = 4,00,000 + 1,50,000 = Rs. 5,50,000

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