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

Answer and explanation

Correct answer: 2/5

The total ratio is 10, so A’s old share is 2/10 and B’s share is 5/10. A acquires \(\frac{2}{5}\) of B’s share, i.e. \(\frac{2}{5}\times\frac{5}{10}=\frac{2}{10}\). Therefore, A’s new share is \(\frac{2}{10}+\frac{2}{10}=\frac{4}{10}=\frac{2}{5}\). Exam tip: after a partner’s retirement, add the share acquired from the retiring partner to the continuing partner’s old share.

Related tags

Partner RetirementNew RatioProfit SharingPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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