Question

ILS
11.
6. (March-11) P and Q were partners sharing profits in the ratio of 3:2. They admit R into
partnership. Future profits and losses are shared between P, Q and R in the ratio of 8:7:5
respectively. If the new partner brings in 50,000 towards goodwill, calculate how much
each of the old partners get?
Ans: 4:1
Note: Goodwill amount shared by: P = 50,000 x 4/5 = 340,000
Q = 50,000 x 1/5 = 10,000​

Answer 1

Given data:

• P and Q are partners in a firm, sharing profits and losses in the ratio 3:2.
• R is admitted into the firm.
• The future profits and losses are to be shared in the ratio 8:7:5.
• R brings in Rs 50,000 as goodwill.

To find: How much the of the goodwill the old partners get.

Answer:

• P's old share = 3/5
• Q's old share = 2/5

• P's new share = 8/20
• Q's new share = 7/20
• R's new share = 5/20

Calculation of the gaining/sacrificing ratio:

Gain/Sacrifice = New ratio - Old ratio

• If the difference is positive, it is a sacrifice.

• If the difference is negative, it is a gain.

For P:

• Gain/Sacrifice = 8/20 - 3/5 = (8 - 12)/20 = -4/20 [Gain]

For Q:

• Gain/Sacrifice = 7/20 - 2/5 = (7 - 8)/20 = -1/20 [Gain]

For R:

• Gain/Sacrifice = 5/20 - 0 = 5/20 [R's part is irrelevant]

Therefore, the gaining ratio is 4:1.

Calculation of the goodwill distribution:

Goodwill share = Goodwill × Gaining ratio

For P:

• Rs 50,000 × 4/5 = Rs 40,000

For Q:

• 50,000 × 1/5 = Rs 10,000

Therefore, P and Q get Rs 40,000 and Rs 10,000 respectively.