you decided to join the partnership of august and april. august has a capital of ₱50 000 while april puts up a capital of ₱75 000. the three of you decided that your profit and loss ratio would be 1:2:3 for august,april and yourself you further agreed to make your capitalization equal to your profit sharing ration. how much additional capital should april and yourself to make your capital contributions equal to your profit and loss sharing ration?
1:2:3 = 50:100:150
What is the solution
To determine the additional capital required for April and yourself to make your capital contributions equal to your profit and loss sharing ratio, we need to calculate the total capital and the required additional capital for April and yourself separately.
1. Calculate the total capital:
- August's capital = ₱50,000
- April's capital = ₱75,000
- Total capital = August's capital + April's capital = ₱50,000 + ₱75,000 = ₱125,000
2. Determine the profit and loss sharing ratio:
- August's share = 1
- April's share = 2
- Your share = 3
- Total share = 1 + 2 + 3 = 6
3. Calculate the capitalization for each partner:
- August's capitalization = (August's share / Total share) * Total capital
= (1 / 6) * ₱125,000
= ₱20,833.33 (rounded to nearest cent)
- April's capitalization = (April's share / Total share) * Total capital
= (2 / 6) * ₱125,000
= ₱41,666.67 (rounded to nearest cent)
- Your capitalization = (Your share / Total share) * Total capital
= (3 / 6) * ₱125,000
= ₱62,500 (rounded to nearest cent)
4. Calculate the additional capital required:
- Additional capital required for April = April's capitalization - April's capital
= ₱41,666.67 - ₱75,000
= -₱33,333.33 (Note: Negative value means no additional capital is needed)
- Additional capital required for yourself = Your capitalization - Your initial capital
= ₱62,500 - ₱0 (assuming you didn't put in any capital initially)
= ₱62,500
Therefore, April does not require any additional capital, while you need to contribute an additional ₱62,500 to make your capital contributions equal to your profit and loss sharing ratio.
To find out how much additional capital April and yourself should contribute in order to match the profit and loss sharing ratio, we need to calculate the total capital contribution required.
According to the agreed profit and loss sharing ratio of 1:2:3 for August, April, and yourself, the total ratio is 1 + 2 + 3 = 6.
To determine the total capital needed, we add up the individual profit sharing ratios:
August: 1/6 x Total Capital
April: 2/6 x Total Capital
Yourself: 3/6 x Total Capital
Given that August's capital is ₱50,000, and April's capital is ₱75,000, we can calculate the values as follows:
August's Share: (1/6) x Total Capital = ₱50,000
April's Share: (2/6) x Total Capital = ₱75,000
Let's solve for Total Capital:
Total Capital = ₱50,000 / (1/6) = ₱50,000 x (6/1) = ₱300,000
Total Capital = ₱75,000 / (2/6) = ₱75,000 x (6/2) = ₱225,000
Now, we need to make the capital contributions equal to the profit sharing ratio. Since August already contributed ₱50,000, and we need to add additional capital:
April's Additional Capital = ₱225,000 - ₱75,000 = ₱150,000
Your Additional Capital = ₱300,000 - ₱225,000 = ₱75,000
Therefore, April should contribute an additional ₱150,000, and you should contribute an additional ₱75,000 to make your capital contributions equal to the profit and loss sharing ratio.