Question

A, B and C are partners sharing profits in 3 : 2 : 1. They admit D as a new partner for `1/4`th share in the profits, and he brought in ₹ 3,00,000 as his share of goodwill which was credited to the Capital Accounts of B and C, respectively, with ₹ 2,50,000 and ₹ 50,000. Their Balance Sheet as at date was as under: Liabilities Amount (₹) Amount (₹) Assets Amount (₹) Amount (₹) A’s Capital   4,00,000 Goodwill   1,20,000 B’s Capital   2,00,000 Land and Building   5,00,000 C’s Capital   2,00,000 Machinery   1,00,000 Creditors   1,50,000 Furniture   40,000 General Reserve   30,000 Debtors 2,00,000 1,92,000       Less: Provision for Doubtful Debts 8,000       Cash at Bank   28,000     9,80,000     9,80,000 The following adjustments are agreed upon: Machinery is reduced by ₹ 60,000. Furniture is reduced to ₹ 15,000. An unrecorded accrued income of ₹ 10,600 is to be accounted. A debtor whose dues of ₹ 50,000 were written off as bad debts paid ₹ 30,000 in full settlement. Bad debts amounting to ₹ 10,000 are to be written off, and provision for doubtful debts is to be maintained at the existing rate. Based on the above information, you are required to answer the following:

New Profit Sharing Ratio will be:

Options

• 3 : 2 : 1 : 1

• 9 : 6 : 3 : 4

• 4 : 1 : 1 : 2

• 3 : 5 : 1 : 1

Answer 1

4 : 1 : 1 : 2

Explanation:

Sacrifice Ratio of B and C : 2,50,000 : 50,000 or 5 : 1

D’s Share is `1/4`

B’s Sacrifice = `1/4 xx 5/6`

= `5/24`

C’s Sacrifice = `1/4 xx 1/6`

= `1/24`

B’s New Share = `2/6 - 5/24`

`2/6 = (2 xx 4)/(6 xx 4) = 8/24`

= `8/24 - 5/24`

= `(8 - 5)/24`

= `3/24`

C’s New Share = `1/6 - 1/24`

`1/6 = (1 xx 4)/(6 xx 4) = 4/24`

= `4/24 - 1/24`

= `(4 - 1)/24`

= `3/24`

A’s New Share = `3/6 xx 4/4`

= `12/24`

D’s New Share = `1/4 xx 6/6`

= `6/24`

New Ratio of A, B, C and D = `12/24 : 3/24 : 3/24 : 6/24`

= 12 : 3 : 3 : 6 or 4 : 1 : 1 : 2