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A, B and C share profits in the ratio 5:8:2. When B retires, the new profit-sharing ratio of A and C becomes 4:1. What is the gaining ratio of A and C?

Answer and explanation

Correct answer: 7:1

Under the old ratio, A, B and C had shares of \(5/15\), \(8/15\) and \(2/15\), respectively. Under the new ratio of 4:1, A gets \(4/5=12/15\) and C gets \(1/5=3/15\). Therefore, A’s gain is \(12/15-5/15=7/15\), while C’s gain is \(3/15-2/15=1/15\). Hence, the gaining ratio is \(7/15:1/15=7:1\). Remember: the new ratio is 4:1, but the gaining ratio is calculated from the increase in each continuing partner’s share.

Related tags

Gaining RatioRetirement Of PartnerNew Profit Sharing RatioPartnership AccountingNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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