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Uses of Ratios and Proportions

A and B are...

Question

$A$ and $B$ are partners sharing profits and losses in the ratio of $2 : 5$ . They admit $C$ on the condition that he will bring in $R s . 14, 000$ as his share of goodwill in cash to be distributed between between $A$ and $B$ . $C^{'} s$ share in the future profits or losses will be $1 / 4^{t h}$ . What will be the new profit-sharing ratio and what amount of goodwill brought in by $C$ will be received by $A$ and $B$ ?

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Solution

(i) New profit sharing ratio:

A's old ratio= 2/7
B's old ratio= 5/7

C is admitted for 1/4th share.
Remaining share= 1-[1/4]
= 3/4
A's new share= 3/4 * 2/7
= 6/28
B's new share= 3/4 * 5/7
= 15/28
New Profit sharing ratio of partners= 6:15:7

(ii) Distribution of Goodwill:
A's share= 2/7 * 14000
= 4000
B's share= 5/7 * 14000
= 10000

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