Question 40
Partnership AccountsUse the following information to answer questions 40 and 41.
Net profit: ₦17,460
Capital Account: Taiwo ₦50,000; Obi ₦40,000
Drawings Account: Taiwo ₦12,000; Obi ₦10,000
Salary - Obi: ₦1,500
Interest on capital: 5%
Interest on drawings: 4%
Profit sharing ratio is 3:2 for Taiwo and Obi respectively.
Taiwo's share of profit is
- A.₦8,960.
- B.₦7,404.
- C.₦4,936.
- D.₦3,296.
Show the answer and explanation
Answer: B (₦7,404.)
Explanation
Residual = 17,460 + interest on drawings 880 − interest on capital 4,500 − salary 1,500 = 12,340; Taiwo 3/5 = ₦7,404.