InterviewSolution
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InterviewSolution
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611 A and B contribute $400,000 and $3,00,000 respectively as their capitals. Theydecide to allow interest on capital @ 8% p.a. Their respective share of profit is 3:2 and theprofit for the year is 42,000 before allowing for interest on capitals. Show the distributionof profits (1) Where there is no agreement except for interest on capitals and (II) Wherethere is a clear agreement that the interest on capitals will be allowed even if it involves thefirm in loss. |
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Answer» total interest = $(32,000 + 24,000) = $56,000available profit = 42,000the ratio of interest = 32 : 24 or we can SAY 4 : 3A's share in profit = 4/7×42,000 = 24,000B's share in profit = 3/7×42,000 = 18,000here we distributed whole profit it is because the SITUATION is interest on capital to be allowed when profit is inadequate. case - 2 total interest = $56,000available profit = $42,000now it lead to loss because a clear Aggrement is there at any cost interest should be allowedshare of loss = $56,000 - $42,000 = 14,000SHARE OF A = 14,000×3/5 = 8400SHARE OF B = 14,000×2/5 = 5600 |
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