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A, B, C and D share profits in the ratio 5:4:3:2. When C retires, A, B and D acquire C’s share in the ratio 1:1:1. What will be the simplified new profit-sharing ratio of A, B and D?

Answer and explanation

Correct answer: 6:5:3

C’s old share is 3 out of a total of 14 parts, i.e. 3/14. Since this share is acquired equally by A, B and D, each receives 1/14. Therefore, A’s new share is 5/14+1/14=6/14, B’s is 4/14+1/14=5/14, and D’s is 2/14+1/14=3/14. Hence, the new ratio is 6:5:3. Exam tip: Express the retiring partner’s share in terms of the total old parts before distributing it according to the acquisition ratio.

Related tags

Partnership AccountsRetirement Of PartnerNew Profit Sharing RatioGaining RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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