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A, B and C share profits in the old ratio 2:5:3. After A's retirement, the new profit-sharing ratio of B and C becomes 3:2. What will be C's position?

Answer and explanation

Correct answer: C gains 1/10

C's old share was 3/10. Under the new ratio of 3:2, C's share becomes 2/5, or 4/10. Therefore, C's gain is 4/10 − 3/10 = 1/10. After a partner's retirement, a gaining partner compensates the retiring partner for goodwill in the gaining ratio. For exams, convert the old and new shares to a common denominator before determining gain or sacrifice.

Related tags

Goodwill-SettlementGaining-RatioRetirement-Of-PartnerProfit-Sharing-RatioGoodwill SettlementReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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