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Difficulty: EasyRetirement and Death of a Partner

Ade, Bola, and Femi are in a partnership sharing profits and losses in the ratio of 3:2:13:2:1 respectively. Bola decides to retire from the business. On the date of his retirement, a revaluation of assets yielded a profit of ₦12,000\text{₦}12,000. What is Bola's share of the revaluation profit?

  1. ₦4,000\text{₦}4,000Answer
  2. B
    ₦6,000\text{₦}6,000
  3. C
    ₦2,000\text{₦}2,000
  4. D
    ₦12,000\text{₦}12,000

Answer

Bola's share of the revaluation profit is ₦4,000\text{₦}4,000.
The correct answer of ₦4,000\text{₦}4,000 is obtained by multiplying the total revaluation profit of ₦12,000\text{₦}12,000 by Bola's profit-sharing fraction of 23+2+1=26\frac{2}{3+2+1} = \frac{2}{6}.

Step-by-Step Solution

1
Calculate the total ratio parts
3+2+1=63 + 2 + 1 = 6 total parts.
The profit-sharing ratio components must be summed to determine each partner's fraction of the total profit.
2
Apportion the revaluation profit to Bola
26×₦12,000=₦4,000\frac{2}{6} \times \text{₦}12,000 = \text{₦}4,000.
Bola's specified proportion is 2 parts out of the total 6 parts.

Key Concept

Revaluation Profit Distribution upon Partner Retirement
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Topics

Retirement and Death of a Partner

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