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CMA Intermediate · Financial Accounting · Retirement of Partner

P, Q and R share profits in the ratio 3:2:1. R retires, and P and Q acquire R's share in the ratio 2:1. What is the new profit sharing ratio of P and Q?

The new ratio is 11:7. R's one-sixth share is split two-to-one, giving P one-ninth and Q one-eighteenth, which are added to their old shares of one-half and one-third, giving eleven-eighteenths and seven-eighteenths.

  1. A11:7Correct
  2. B3:2
  3. C2:1
  4. D5:4

Explanation

R's share is 1/6. P gets 2/3 of it = 1/9; Q gets 1/18. P's new share = 1/2 + 1/9 = 11/18. Q's new share = 1/3 + 1/18 = 7/18. Ratio is 11:7. Option 3:2 ignores R's share completely.

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