Question

P and S are partners sharing profits in the ratio of 3 : 2. R is admitted with a `1/5`th share and he brings in ₹ 84,000 as his share of goodwill, which is credited to the capital accounts of P and S, respectively, with ₹ 63,000 and ₹ 21,000. New profit sharing ratio will be ______.

Options

• 3 : 1 : 5

• 9 : 7 : 4

• 3 : 2 : 5

• 7 : 9 : 4

Answer 1

P and S are partners sharing profits in the ratio of 3 : 2. R is admitted with a `1/5`th share and he brings in ₹ 84,000 as his share of goodwill, which is credited to the capital accounts of P and S, respectively, with ₹ 63,000 and ₹ 21,000. New profit sharing ratio will be 9 : 7 : 4.

Explanation:

The goodwill premium of ₹ 84,000 is credited to P and S in their sacrificing ratio, with ₹ 63,000 to P and ₹ 21,000 to S.

Sacrificing ratio of P and S = 63,000 : 21,000 or 3 : 1

Calculate the share sacrificed by P and S:

R’s total share is `1/5`,  which is acquired from P and S in the 3:1 ratio.

P’s Sacrificed Share = `1/5 xx 3/4`

= `3/20`

S’s Sacrificed Share = `1/5 xx 1/4`

= `1/20`

Calculate the new profit shares:

P’s New Share = `3/5 - 3/20`

= `(3 xx 4)/(5 xx 4) - 3/20`

= `12/20 - 3/20`

= `9/20`

S’s New Share = `2/5 - 1/20`

= `(2 xx 4)/(5 xx 4) - 1/20`

= `8/20 - 1/20`

= `7/20`

R’s share = `1/5`

= `(1 xx 4)/(5 xx 4)`

= `4/20`

The new ratio for P, S, and R = `9/20 : 7/20 : 4/20` or 9 : 7 : 4