Multiple choice

X and Y are partners sharing profits and losses in the ration of 3:2 having the capital of Rs. 1,60,000 and Rs. 1,00,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs.15,600 before allowing any interest on capital. Profits apportioned among X and Y is ___________.

  1. Rs.9,360 and Rs. 6,240

  2. Rs. 9,600 and Rs. 6,000

  3. Rs. 10,000 and Rs. 5,600

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on capital: X = 1,60,000 * 9% = 14,400. Y = 1,00,000 * 9% = 9,000. Total interest = 23,400. Since the profit (15,600) is less than the interest due (23,400), the profit is distributed in the ratio of the interest due, which is 14,400:9,000 = 8:5. X gets (8/13)*15,600 = 9,600. Y gets (5/13)*15,600 = 6,000.

AI explanation

First, calculate the total interest on capital payable to X and Y, which is 9% of Rs. 1,60,000 (Rs. 14,400) and 9% of Rs. 1,00,000 (Rs. 9,000), totaling Rs. 23,400. Because the firm only earned Rs. 15,600 before interest, there is a deficit, meaning the interest on capital cannot be fully paid and the available profit must be divided in the ratio of the original capital balances. The capital ratio of X to Y is 1,60,000 to 1,00,000, which simplifies to 8 to 5. Dividing the Rs. 15,600 profit in this 8 to 5 ratio results in X receiving Rs. 9,600 and Y receiving Rs. 6,000. The apportioned profits are Rs. 9,600 and Rs. 6,000.

Keep practicing — related questions