ICANFinancial AccountingPartnership Accounts2021

Adaeze, Bello, and Chukwu are partners sharing profits and losses in the ratio 3:2:1 respectively. The partnership profit for the year ended 31 December 2023 before charging interest on capital was ₦7,200,000. Interest on capital is allowed at 10% per annum on fixed capitals of ₦3,000,000, ₦2,000,000, and ₦1,000,000 respectively. What is Chukwu's total share of profit including interest on capital?

A₦1,100,000
B₦1,200,000CORRECT
C₦1,000,000
D₦1,300,000
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Total interest on capital = 10% × (₦3,000,000 + ₦2,000,000 + ₦1,000,000) = ₦600,000. Residual profit = ₦7,200,000 − ₦600,000 = ₦6,600,000. Chukwu's share of residual profit = 1/6 × ₦6,600,000 = ₦1,100,000. Chukwu's interest on capital = 10% × ₦1,000,000 = ₦100,000. Chukwu's total = ₦1,100,000 + ₦100,000 = ₦1,200,000.
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