Question

69. X and Y are partners in the ratio of 3 : 2. Their capitals are $2,00,000 and 1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of 360,000 for the year ended 31st March 2019. Interest on Capital will be: (A) X 16,000; Y 8,000 (B) X 8,000; Y 4,000 (C) X 14,400; Y 9,600 (D) No Interest will be allowed DOTC​

Answer 1

Answer:

A. X 16,000 ; Y 8,000

Explanation:

Since the total interest on capital is 24000 [8% of (2,00,000 + 1,00,000)], and the profit earned for the year is more that the interest charges, so the complete amount will be paid as interest to X and Y amount to the value of interest @8% of capital invested.