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Question

Asha and Lata are partners with capitals of ₹6,00,000 and ₹3,00,000 respectively, on which they are entitled to interest at 10% p.a. They divide profits in the ratio of 2 : 1. They take Sudha, manager of the business for the past 15 years, as a partner in the firm with 1/4th share of profits and guaranteed that her share of profits will not be less than ₹2,00,000. Sudha brought ₹3,00,000 as her capital. Any deficiency in Sudha’s minimum guaranteed profit will be borne by Asha and Lata in the ratio of 4 : 1. Profits at the end of the year before allowing interest on capitals amounted to ₹7,20,000.

Calculate total interest on capital given to all partners:

[2 marks]

A
₹1,20,000
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B
₹90,000
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C
₹60,000
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D
₹30,000
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Solution

The correct option is A ₹1,20,000
Interest on Capital = Opening Capital x Rate



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