A, B and C are partners sharing profits in 2:2:1 ratio admitted D for 1/8 share which he acquired entirely from A. Calculate new profit sharing ratio?
11:16:8:5
Explanation
This is a numerical problem on calculation of new profit sharing ratio when a new partner is admitted. The key concept is that when D acquires his share entirely from A, only A's share changes while B and C's shares remain unchanged. The sacrifice made by A equals the share acquired by D. The new ratio is calculated by subtracting the sacrificed portion from A's original share and keeping B and C's shares intact.
Solution Steps
Step 1: Calculate old profit sharing ratio of A, B and C Old Ratio of A : B : C = 2 : 2 : 1 A's share = 2/5, B's share = 2/5, C's share = 1/5
Step 2: Identify the sacrifice D is admitted for 1/8 share which he acquired entirely from A. Therefore, A's sacrifice = 1/8
Step 3: Calculate new shares of all partners A's new share = 2/5 - 1/8 = 16/40 - 5/40 = 11/40 B's new share = 2/5 = 16/40 (no change) C's new share = 1/5 = 8/40 (no change) D's share = 1/8 = 5/40
Step 4: Calculate new profit sharing ratio New Ratio = A : B : C : D = 11/40 : 16/40 : 8/40 : 5/40 = 11 : 16 : 8 : 5