Question

A and B are partners having capital of Rs. 5,000 and Rs. 6,000 respectively. Interest on capital is given @ 5% p. a. Profits for the year before the appropriation is Rs. 4.600 provide interest on capital out of profits. Interest allocated to partners is:

• A. Rs. 3,000 and Rs. 2,500
• B. Rs. 2,091 and Rs. 2,509
• C. Rs. 2,500 and Rs. 2,091
• D. Rs. 600 and Rs. 300

Answer 1

The correct option is B Rs. 2,091 and Rs. 2,509

Interest on capital = capital x rate

A :-

= 50,000 x 5/100

= RS-2,500.

B:-

= 60,000 x 5/100

= RS-3,000.

Apportioned in the ratio of interest to be allowed to the extent of profits available:-

A:-

= 2,500

-------------- x 4,600

5,500

= RS-2,090.

B:-

= 3,000

------------- x 4,600

5,500

= RS-2,509.