Amit, Rekha and Nitin are partners in a firm. Rekha retires from the firm and total ₹75,000 were due to her on the date of her retirement. It was decided that the payment to her will be paid in 2 equal yearly installments of 25,000 including interest @ 10% p.a. on the outstanding balance during the first 2 years and balance including interest in the 3rd year. Total interest paid to her is:
Answer & explanation
Correct answer: option 3
The correct answer is option 4- ₹13,075.
Total amount paid = ₹75,000
2 Equal installment = 25,000
* Interest for 1st year = 75000 x 10/100 (Interest given for the full year)
= 7,500
First installment of 25,000 & interest 7,500 given at the end of Ist year.
Remaining balance = 75,000 - 25,000 -7,500
= 42,500
* Interest for 2nd year on the remaining balance = 42,500 x 10/100
= 4,250
2nd installment of 25,000 & interest 4,250 given at the end of 2nd year.
Remaining balance = 42,500 - 25,000 -4,250
= 13,250
* * Interest for 3rd year on the remaining balance = 13,250 x 10/100
= 1,325
Last installment = 13,250 + 1,325
= 14,575
Total interest = 7,500 + 4,250 + 1,325
= 13,075