Anupam and Abhishek are partners. Their capital accounts showed balances of Rs. 1,50,000 and Rs. 2,00,000 respectively on April 01, 2019. Show the interest on capital for the year ending March 31, 2020 allowed, If the partnership deed provides for interest on capital @ 8% p.a. and the firm earned a profit of Rs. 14,000 during the year:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 14,000.
Available profit = 14,000
Interest on Anupam capital = 1,50,000 x 8/100
= 12,000
Interest on Abhishek capital = 2,00,000 x 8/100
= 16,000
Total interest = 12,000 + 16,000
= 28,000
Ratio of interest on capital = 12,000 : 16,000
= 12:16
= 3:4
Interest provided to Anupam = 14,000 x 3/7
= 6,000
Interest provided to Abhishek = 14,000 x 4/7
= 8,000
As profit is 14,000 so only that amount can be provided as interest on capital to partners.