Question

From the following Balance Sheet of Long and Short, calculate interst on capital @ 8% p.a. for the year ended 31st March, 2018.
During the year, Long withdrew ₹ 40,000 and Short withdrew ₹ 50,000. Profit for the year was ₹ 1,50,000 out of which ₹ 1,00,000 was transferred to General Reserve.

Answer 1

Answer:

Interest on long term is Rs. 10,800 and on short term is Rs. 13,200

Explanation:

Calculation of capital at the beginning as on 1.04.17

Particulars                                                       Long(Rs)        Short(Rs)

Capital at the end of the year                          1,20,000        1,40,000

   Less: Adjusted Profit                                       (25,000)        (25,000)

            (1,50,000-1,00,000) in 1:1 ratio

    Add: Adjusted Drawings                               40,000           50,000

   ∴   Capital at the beginning                         1,35,000          1,65,000    

Interest on Long term borrowing= 1,35,000 x  8   = 10,800

                                                                           100

Interest on Short term borrowings = 1,65,000 x 8 = 13,200

                                                                              100                    

Answer 2

Answer:

given below in the attachment