A, B, C and D were partners in a firm sharing profits and losses equally. E was admitted as a new partner for 1/3 rd share in the profits of the firm which he acquires equally from C and D. On E's admission the goodwill of the firm was valued at 3,00,000. Calculate the new profit sharing ratio on B's admission.
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Answers
A's old share= 36/100
B's old share= 24/100
C's old share= 20/100
D's old share= 20/100
E is admitted for 20/100th share
Remaining share= 1-[20/100]
= 80/100
New ratio among partners should be 3:4:2:1
A's new share= 3/10 * 80/100
= 24/100
B's new share= 4/10 * 80/100
= 32/100
C's new share= 2/10 * 80/100
= 16/100
D's new share= 1/10 * 80/100
= 8/100
New profit sharing ratio= 24:32:16:8:20
= 6:8:4:2:5
The new profit sharing ratio on E's admission is 3:3:1:1:4
Old profit sharing ratios before E's admission is as follows:
1. A- 1/4
2. B -1/4
3. C- 1/4
4. D- 1/4
On admission of E, he acquires 1/3rd share from C and D, so C and D are sacrificing their profit share
We will now calculate the sacrificing ratio, E will get 1/3 by C and D, so they will give 1/2 of 1/3 to E. Mathematically it is
1/2×1/3=1/6
Now we will calculate the new share by subtracting this from C and D share.
New profit sharing ratios are as follows:
A= 1/4=1/4×3/3=3/12
B= 1/4=1/4×3/3=3/12
C= 1/4-1/6=6-4/24=2/24=1/12
D=1/4-1/6=6-4/24=2/24=1/12
E= 1/3=1/3×4/4=4/12
The new profit sharing ratio is 3:3:1:1:4
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