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WAEC Financial Accounting 2005 Question 16

Question 16

Partnership Accounts

Capital Accounts: Ade N60,000; Bola N40,000
Current Accounts: Ade N10,000 Cr.; Bola N6,000 Dr.
Drawings: Ade N8,000; Bola N2,000
Interest on drawings is 5%, interest on capital is 10%. Profits and losses are shared equally. Net profit for the year is N30,000.
The amount of distributable profit is

  1. A.N39,500
  2. B.N30,500
  3. C.N30,000
  4. D.N20,500.
Show the answer and explanation

Answer: D (N20,500.)

Explanation

30,000 + interest on drawings 500 − interest on capital 10,000 = N20,500.