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Gold and Silver are partners sharing profits and losses in the ratio of 2: 5. They admit Copper on the condition that he will bring Rs. 14,000 as his share of goodwill to be distributed between Gold and Silver. Copper’s share in the future profits or losses will be 1 / 4th. What will be the new profit-sharing ratio and what amount of goodwill brought in by copper will be received by Gold and Silver? 

SOLUTION

Old Ratio = A: B = 2: 5
C is admitted for 1/4share
Let the combined share of A, B and C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
= 1 – 1/4
= 3/4

New Ratio = Old Ratio – Combined share of A and B

A’s= 2/7 × 3/4
= 6/28
B’s = 5 / 7 × 3 / 4
 = 15 / 28

New profit-sharing ratio =

ABC
6/2815/281/4
6/2815/287/28
6157

Distribution of C’s share of Goodwill or A and B will be covered
C’s share of Goodwill = Rs. 14,000
A will get = 14,000 × 2/7 = Rs. 4,000
B will get = 14,000 × 5/7 = Rs. 10,000


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