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

Answer and explanation

Correct answer: 4:9:7

The total of the old ratio is 10, so C’s share is 2/10. This share is acquired by A, B and D in the ratio 2:1:1, giving them increments of 1/10, 1/20 and 1/20 respectively. Their new shares are A = 1/10 + 1/10 = 4/20, B = 4/10 + 1/20 = 9/20, and D = 3/10 + 1/20 = 7/20. Hence, the new ratio is 4:9:7. Exam tip: distribute the outgoing partner’s share according to the acquiring ratio, not according to the old ratio.

Related tags

AccountancyPartnershipReconstitutionRetirement Or DeathNew RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A Partner

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