Multiple choice

A & B entered into a joint venture to purchase and sell crackers. Profits or losses were to be shared equally. A purchases crackers worth Rs$1,00,000$ and incurred the following expenses in sending it to B: Forwarding charges Rs$6,000$, Insurance charges Rs$5,000$ and Rental charges Rs$4,000$. The whole crackers were disposed of by B for Rs$2,20,000$. B incurred advertisement expenses Rs$20,000$. Which of the following statement is correct by the above given data.

  1. A will remit Rs$65,000$ to B.
  2. B will remit Rs$65,000$ to A.
  3. A will remit Rs$1,57,500$ to B.
  4. B will remit Rs$1,57,500$ to A.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total cost for A = 100,000 + 6,000 + 5,000 + 4,000 = 115,000. Total sales by B = 220,000. Expenses by B = 20,000. Net profit = 220,000 - 115,000 - 20,000 = 85,000. Profit share = 42,500 each. A's total investment = 115,000. A should receive 115,000 + 42,500 = 157,500 from B.

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