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

Answer and explanation

Correct answer: 7:10:13

D’s old share was 4 out of 10, i.e. 4/10. Since this share is acquired equally by A, B and C, each receives 4/30. Therefore, their new shares are 1/10 + 4/30 = 7/30, 2/10 + 4/30 = 10/30, and 3/10 + 4/30 = 13/30. Hence, the new ratio is 7:10:13. Exam tip: When the retiring partner’s share is acquired equally, add an equal fraction of that share to each continuing partner’s old share.

Related tags

Retirement Of PartnerNew RatioEqual AcquisitionProfit Sharing RatioPartnership AccountingNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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