Read the following information to answer.

Arun and Ram are partners in a restaurant business sharing profits and losses in capital ratio. Their fixed capital from the beginning of the firm was ₹2,00,000 and ₹1,50,000 respectively.

The profit for the year ended 31 March 2022 before the appropriation of Salary and Interest on Capital was ₹2,20,000. Ram is allowed a salary of ₹ 2,000 per quarter and interest on capital @ 10% p.a.

Due to the further expansion of the business, they decided to enter Sanjeev as a new partner for 1/5 share in profits. It was agreed that Sanjeev will bring ₹1,00,000 as capital and ₹50,000 as his share of Goodwill. It was decided that he will give ₹1,00,000 as loan to the firm for 3 years.

The new profit sharing ratio of Arun, Ram and Sanjeev will be:

16:12:7

The correct answer is option 3- 16:12:7.

Old ratio = 4:3 (Arun and Ram)
Sanjeev share = 1/5
Let whole profit = 1
Remaining share after Sanjeev = 1-1/5
                                                 = 4/5

This 4/5 distributed between Arun and Ram in their old ratio

Arun new share = 4/5 X 4/7
                          = 16/35
Ram new share = 4/5 X 3/7
                          = 12/35

New ratio = 16/35:12/35:1/5
                = 16:12:7