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

Answer and explanation

Correct answer: 27:20:13

D’s original share is 1/10. On distributing it in the ratio 3:2:1, A, B and C gain 1/20, 1/30 and 1/60 respectively. Their original shares are 4/10, 3/10 and 2/10, or 24/60, 18/60 and 12/60. Adding the gains gives 27/60, 20/60 and 13/60, so the new ratio is 27:20:13. The ratio 4:3:2 merely retains the old ratio among A, B and C without adding D’s redistributed share. Exam tip: first calculate the retiring partner’s share, then distribute it according to the gaining ratio.

Related tags

Retirement Of PartnerNew Profit Sharing RatioGaining RatioPartnership AccountsReconstitutionNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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