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A, B, C and D share profits in the ratio 6:4:3:2. When D retires, A, B and C acquire D’s share in the ratio 1:2:1. What will be their simplified new profit-sharing ratio?

Answer and explanation

Correct answer: 13:10:7

D’s old profit-sharing fraction is \(2/15\). Dividing it among A, B and C in the ratio 1:2:1 gives them additional shares of \(1/30\), \(1/15\) and \(1/30\), respectively. Thus, the new shares are A = \(6/15+1/30=13/30\), B = \(4/15+1/15=10/30\), and C = \(3/15+1/30=7/30\). Therefore, the new ratio is 13:10:7. Exam tip: Divide the retiring partner’s share in the stated gaining ratio and add each gain to the partner’s old share.

Related tags

Partnership AccountsRetirement Of PartnerNew Profit Sharing RatioGaining RatioFraction CalculationNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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