Question

Sunflower and Pink Rose Started Partnership business on April 01, 2006 with capitals of Rs 2,50,000 and Rs 1,50,000 respectivley. On October 01, 2006, they decided that their capitals should be Rs 2,00,000 each. The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on capital is to be allowed @ 10% pa. Calculate interest on capital as on March 31, 2007.

Answer 1

Interest on Capital

Sunflower $\Rightarrow (2,50,000\times \frac{10}{100}\times \frac{6}{12})+(2,00,000\times \frac{10}{100}\times \frac{6}{12})$

= 12,500 + 10,000

= Rs 22,500

Pink Rose $\Rightarrow (1,50,000\times \frac{10}{100}\times \frac{6}{12})+(2,00,000\times \frac{10}{100}\times \frac{6}{12})$

= 7,500 + 10,000

= Rs 17,500

Note: Interest on capital can be calculated by product method also but the answer remains same.