Multiple choice

A and B are partners sharing profits in the ratio of 3 : 2 with capitals of Rs. 50,000 and Rs. 30,000, respectively. Interest on capital is agreed at the rate of 6% p.a. During 2000, B is to be allowed an annual salary of Rs. 2,500. The profits of the year prior to the calculation of interest on capital amounted to Rs. 12,500 after charging B's salary. The manager is to be allowed a commission of 5% of profits remaining after deducting salary. Then the interest on capital profit transferred to partner's capital accounts before charging such commission will be

  1. A: Rs. 4,389, B: Rs. 2,926

  2. A: Rs. 4,000, B: Rs. 3,315

  3. A: Rs. 3,000, B: Rs. 4,315

  4. A: Rs. 2,500, B: Rs. 4,815
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A Correct answer
Explanation

Profit before interest = 12500 + 2500 (salary) = 15000. Interest on A = 3000, B = 1800. Total interest = 4800. Profit after salary and interest = 15000 - 2500 - 4800 = 7700. Manager commission = 5% of 12500 = 625. This question is complex; based on standard accounting, the profit distribution is 3:2.

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