Question 12
Partnership AccountsUse the following information to answer questions 12 to 14.
Ata, Bubu and Chikum were in partnership sharing profits and losses in proportion to their capital contributions: (Capital / Drawings)
Ata: ₦40,000 / ₦8,000
Bubu: ₦30,000 / ₦5,000
Chikum: ₦20,000
Net profit for the year was N 40,500 and the interest on capital was 5% per annum.
The profit available for sharing by the partners is
- A.₦90,000.
- B.₦40,500.
- C.₦36,000.
- D.₦27,500.
Show the answer and explanation
Answer: C (₦36,000.)
Explanation
Interest on capital = 5% × 90,000 = 4,500; 40,500 − 4,500 = ₦36,000.