Question

A, B and C are partners sharing profits in 3 : 2 : 1. They admitted D as a new partner. On this date following balances have been extracted from their books: Particulars Amount (₹) A’s Capital 5,00,000 B’s Capital 3,00,000 C’s Capital 2,00,000 Building 6,00,000 Workmen’s Compensation Reserve 70,000 Bills Receivables 50,000 D was given `1/6`th share of profits, which he acquires from A and B in the ratio of 2 : 1. It was further agreed that: Goodwill of the firm is valued at ₹ 3,60,000. D brings half of his share of goodwill in Cash. Building is undervalued by 20%. There is an unrecorded asset of ₹ 60,000. Liability for the Workmen’s Compensation claim is estimated at ₹ 1,00,000. A bill of exchange of ₹ 20,000 which was previously discounted with the bank had dishonoured, but no entry has been passed for dishonour. Based on the above information, you are required to answer the following question:

New Profit Sharing Ratio will be:

Options

• 3 : 2 : 1 : 1

• 7 : 5 : 2 : 2

• 7 : 5 : 1 : 1

• 7 : 5 : 3 : 3

Answer 1

7 : 5 : 3 : 3

Explanation:

Sacrifice by A = `1/6 xx 2/3`

= `2/18`

Sacrifice by B = `1/6 xx 1/3`

= `1/18`

A’s new share = `3/6 - 2/18`

`3/6 = (3 xx 3)/(6 xx 3) = 9/18`

= `9/18 - 2/18`

= `(9 - 2)/18`

= `7/18`

B’s new share = `2/6 - 1/18`

`2/6 = (2 xx 3)/(6 xx 3) = 6/18`

= `6/18 - 1/18`

= `(6 - 1)/18`

= `5/18`

C’s new share  = `1/6 xx 3/3`

= `3/18`

D’s new share  = `1/6 xx 3/3`

= `3/18`

New Share of A, B, C and D = `7/18 : 5/18 : 3/18 : 3/18` or 7 : 5 : 3 : 3