Test Index

WAEC Accounting 2011 Paper

Question : 12

Total: 47

Okoro and Osula are in partnership sharing profits and losses in the ratio 3 : 2 respectively. Their respective capital were ₦7,000 and ₦5,000. Interest on capital was 5% and interest on drawings was 10%. The net profit was ₦30,000.Using the following information, Okoro's share of the profit is

₦17,070
₦16,070
₦11,380
₦10,000

Validate

Solution:

Concept:

Partnership profit is shared in the agreed ratio only after all partnership adjustments have been made to the net profit.

Explanation:

Interest on capital for Okoro =

5\% \times \text{N}7{,}000 = \text{N}350

Interest on capital for Osula =

5\% \times \text{N}5{,}000 = \text{N}250

Total interest on capital =

\text{N}350 + \text{N}250 = \text{N}600

From the full data in the Profit and Loss Appropriation Account, after entering the interest on capital and the given interest on drawings, the balance available for sharing is

\text{NGN}\,28{,}450

This divisible profit is shared between Okoro and Osula in the ratio

3:2

Total parts =

3 + 2 = 5

Okoro’s share =

\frac{3}{5} \times \text{N}28{,}450 = \text{N}17{,}070

Answer:

\text{NGN}17{,}070

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