AB and C are partners sharing profits in a 2:2:1 ratio. D is admitted for a 1/8 share which he acquired entirely from A. Calculate the new profit sharing ratio.
Answer (2)
The new profit sharing ratio after admitting D, who takes 1/8 share from A, is 11:16:8:5. A's share is adjusted to 11/40, while B and C retain their shares. D's share is represented as 5/40 or 1/8 of the total profits.
;
To calculate the new profit sharing ratio when a new partner, D, is admitted into the partnership, we follow these steps:
Determine A's Original Share:
The original profit-sharing ratio is 2:2:1 for partners A, B, and C.
The total parts of the profit are 2 + 2 + 1 = 5 parts.
A's share is 5 2 .
Calculate the Amount A Gives to D:
D is admitted for a 8 1 share.
A gives this 8 1 share entirely to D.
Determine A's New Share:
Subtract the share A gives to D from A's original share.
A's new share = A's original share - D's share
A's new share = 5 2 − 8 1
To subtract these fractions, find a common denominator. The least common multiple of 5 and 8 is 40.
A's share in terms of a common denominator: 5 2 = 40 16 and 8 1 = 40 5
A's new share = 40 16 − 40 5 = 40 11
Determine B's and C's Shares:
B's share remains unchanged at 5 2 = 40 16 .
C's share remains unchanged at 5 1 = 40 8 .
Combine the New Shares of All Partners:
D's share is 8 1 = 40 5 .
Calculate the New Profit Shares:
A: 40 11
B: 40 16
C: 40 8
D: 40 5
Thus, the new profit sharing ratio among A, B, C, and D is 11 : 16 : 8 : 5 based on their respective fractional shares.
