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A, B, C and D share profits in the ratio 3:4:5:2. A retires, and B, C and D acquire A’s profit share in the gaining ratio 2:1:0. What will be the new profit-sharing ratio of B, C and D?

Answer and explanation

Correct answer: 6:6:2

A’s original share was 3 out of the total 14 parts, or 3/14. This share is acquired by B, C and D in the ratio 2:1:0. Thus, B gains 2/14, C gains 1/14 and D gains nothing. Their new shares are B = 4/14 + 2/14 = 6/14, C = 5/14 + 1/14 = 6/14 and D = 2/14. Therefore, the new ratio is 6:6:2. Exam tip: Add the retiring partner’s share to each continuing partner’s old share according to the gaining ratio.

Related tags

Partnership AccountsRetirement Of PartnerNew RatioGaining RatioFour PartnersNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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