Question

M & N enter into a joint venture where M supplies goods worth Rs$6,000$ and spends Rs$300$ on expenses. N sells the entire lot for Rs$7,800$ paying selling expenses amounting to Rs$300$. Profit sharing ratio is equal. N remits to M the amount due. The amount of remittance will be -

• A. Rs$6,900$
• B. Rs$7,500$
• C. Rs$6,300$
• D. Rs$6,600$

Answer 1

The correct option is D Rs$6,600$

Cost of goods = Rs. 6,000

Sale price of goods = Rs. 7,800

Profit on sale of goods = Sale price - Cost price = Rs. 7,800 - Rs. 6,000 = Rs. 1,800

Profit sharing ratio = 1 : 1

Profit of M = Profit of N = Total profit x 1/2 = Rs. 1,800 x 1/2 =Rs. 900

Amount to be remitted by N to M = Proceeds from sale - expenses incurred (selling expenses) - N's share of profit = Rs. 7,800 - Rs. 300 - Rs. 900 = Rs. 6,600.