Question 2 of 64intermediate🔧 ApplyMCQ1 mark

X and Y share profits in the ratio of 3:2. Z was admitted as a partner who sets 1/5 share. New profit sharing ratio, if Z acquires 3/20 from X and 1/20 from Y would be:

Exercise: Test your Understanding - I | Q: 2 | (Page 8)
For More Understanding

Explanation

Option A is correct. The provided context demonstrates the calculation of the new profit sharing ratio by deducting the share surrendered by the old partners from their old share. Specifically, the solution steps in the context show that New Share = Old Share – Share Surrendered. Here, X surrenders 3/20 and Y surrenders 1/20. Calculating X's new share (3/5 - 3/20 = 9/20), Y's new share (2/5 - 1/20 = 7/20), and Z's share (1/5 = 4/20) results in the ratio 9:7:4.

Solution Steps

  1. Step 1: Calculate the old profit sharing shares of X and Y.

  2. X's Share = 3/(3+2) = 3/5

  3. Y's Share = 2/(3+2) = 2/5

  4. Step 2: Identify the share surrendered by old partners to Z.

  5. X surrenders = 3/20

  6. Y surrenders = 1/20

  7. Step 3: Calculate the new share of each partner using the formula: New Share = Old Share – Share Surrendered.

  8. X's New Share = 3/5 - 3/20 = (12-3)/20 = 9/20

  9. Y's New Share = 2/5 - 1/20 = (8-1)/20 = 7/20

  10. Z's Share = 1/5 = 4/20

  11. Step 4: Determine the New Profit Sharing Ratio.

  12. X : Y : Z = 9/20 : 7/20 : 4/20

  13. New Profit Sharing Ratio = 9 : 7 : 4

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