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A, B and C share profits in the ratio 7:5:3. C retires, and A and B acquire C’s share in the ratio 2:1. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 3:2

The total ratio is 7+5+3=15, so C’s share is 3/15. A acquires 2/3 of C’s share, which is 2/15, while B acquires 1/3, which is 1/15. Therefore, A’s new share is 7/15+2/15=9/15 and B’s is 5/15+1/15=6/15. Thus, the new ratio is 9:6, simplified to 3:2. Exam tip: Add each partner’s acquired portion of the retiring partner’s share to that partner’s old share.

Related tags

Retirement Of PartnerNew RatioProfit Sharing RatioAccounting RatiosPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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