X and Y are partners in a business sharing profits and losses in the ratio of 3:2. They admit Z as a…
When Z is admitted for a 1/5 share of profits, the remaining combined share available for old partners X and Y is 1 - 1/5 = 4/5. Sharing this remaining 4/5 in their old…
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X and Y are partners in a business sharing profits and losses in the ratio of 3:2. They admit Z as a new partner with 1/5 share in the profits. Calculate the new profit-sharing ratio of the partners.
Answer and explanation
Correct answer A
When Z is admitted for a 1/5 share of profits, the remaining combined share available for old partners X and Y is 1 - 1/5 = 4/5. Sharing this remaining 4/5 in their old ratio of 3:2 gives X's new share = (3/5)*(4/5) = 12/25, Y's new share = (2/5)*(4/5) = 8/25, and Z's share = 1/5 = 5/25, yielding a new profit-sharing ratio of 12:8:5.
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UGC NET Commerce