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

Answer and explanation

Correct answer: 3:7:10

D’s old share was 2 out of 10, i.e. 2/10. When this share is acquired in the ratio 1:1:2, A, B and C receive 1/20, 1/20 and 2/20 respectively. Their new shares become 2/20+1/20=3/20, 6/20+1/20=7/20 and 8/20+2/20=10/20. Therefore, the new ratio is 3:7:10. Remember that 1:1:2 is only the ratio for acquiring D’s share, not the final profit-sharing ratio.

Related tags

Partnership AccountsPartner RetirementNew RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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