Multiple choice

A, B and C are partners yeah profits sharing ratio of 4 : 3: 2.B retires and Goodwill of Rs. 10,800 was valued. If A & C share future profits in the ratio of 5 : 3, then the amount of goodwill to be shared between A and C will be _______.

  1. Rs. 1,850 and Rs. 1,959

  2. Rs. 1,650 and Rs. 1,750

  3. Rs. 2,000 and Rs. 1,600

  4. Rs. 1,950 and Rs. 1,650
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When B retires, B's share of goodwill, which is 3/9 of Rs. 10,800 (or Rs. 3,600), must be compensated by A and C in their gaining ratio. The gaining ratio is calculated as the difference between the new ratio and the old ratio, which is 13:11 for A and C. Dividing Rs. 3,600 in the ratio 13:11 gives Rs. 1,950 for A and Rs. 1,650 for C.

AI explanation

The gaining ratio is calculated by subtracting the old ratio from the new ratio. A gains 5/8 minus 4/9, which equals 13/72, and C gains 3/8 minus 2/9, which equals 11/72. B's share of the Rs. 10,800 goodwill is 3/9, or Rs. 3,600, which is distributed to A and C in their gaining ratio of 13:11; A receives Rs. 1,950 and C receives Rs. 1,650.

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