Question

A and B are partners sharing profits in the ratio of 2:1. C is admitted into the firm for 1/4 share of profits. C brings in Rs. 20,000 in respect of his capital. The capitals of old partners A and B, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are Rs. 45,000 and Rs. 15,000 respectively. It is agreed that partners' capitals should be according to the new profit sharing ratio. Determine the new profit sharing ratio.

• A. 6 : 3 : 2
• B. 2 : 1 : 1
• C. 2 : 1 : 2
• D. 1 : 2 : 1

Hint:

When partners' capitals are adjusted to the new ratio, always take total capital as the base and then distribute according to agreed ratio.

Answer 1

The Correct Option is A

Step 1: Determine the firm's total capital.
Capital contributed by A: Rs. 45,000.
Capital contributed by B: Rs. 15,000.
Capital contributed by C: Rs. 20,000.
Total Capital = 45,000 + 15,000 + 20,000 = Rs. 80,000.

Step 2: Calculate the initial capital ratio.
A : B : C = 45,000 : 15,000 : 20,000.
Simplify by dividing each part by 5,000: A : B : C = 9 : 3 : 4.

Step 3: Adjust to the new profit-sharing ratio.
With C admitted for a 1/4th share, C's ratio is 1/4, equivalent to 4 parts out of 16.
The remaining 12 parts (16 - 4) are to be distributed between A and B in the ratio of 2:1. This results in A receiving 8 parts (12 * 2/3) and B receiving 4 parts (12 * 1/3).
Therefore, the final profit-sharing ratio is A : B : C = 8 : 4 : 4.
Simplify this ratio by dividing each part by 2: A : B : C = 6 : 3 : 2.

Final Answer: \[\boxed{6 : 3 : 2}\]