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After a partner’s retirement, the new ratio of the remaining partners is 7:5, while their old profit-sharing shares were 1/2 and 1/3, respectively. What is their gaining ratio?

Answer and explanation

Correct answer: 1:1

The total of the new ratio 7:5 is 12, so the new shares are 7/12 and 5/12. The first partner’s gain is 7/12 − 1/2 = 1/12, and the second partner’s gain is 5/12 − 1/3 = 1/12. Therefore, the gaining ratio is 1/12:1/12 = 1:1. Option B is the new ratio, not the gaining ratio. Exam tip: Calculate each partner’s gain by subtracting the old share from the new share.

Related tags

Gaining RatioNew RatioRetirement Of PartnerPartnership AccountsOld ShareNew ShareNew RatiosReconstitution Retirement Or Death Of A Partner

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