- August 24, 2017 at 6:51 am
This is the question from ACCA-X and I still don’t understand how to get the correct answer.
Tony and Benny are partners in their firm BenTone. The balances of each partner’s capital and current account at 1 October 20X2 were:
Capital account: Tony $10,000 credit
Capital account: Benny $10,000 credit
Current account: Tony $3,000 debit
Current account: Benny $8,000 credit
In the year ended 30 September 20X3, BenTone made a profit of $14,000. Their partnership agreement provides for interest on capital at 8% p.a., interest on drawings at 10% p.a. and a profit share ratio of 2:1 in Tony’s favour.
During the year, Tony took drawings of $10,000 from the firm and Benny took drawings of $40,000 from the firm.
What is Benny’s share of profit for the year?
The correct answer is B. $2,600.August 29, 2017 at 4:55 pm
Before the profit sharing ratio is applied to 14,000 it is updated by the amounts of interest paid/received on drawings and capital account:
14000 + 10000 x 10% + 40000 x 10% – (10000+10000) x 8% = 17400
Of this, Benny gets 1/3 = 5800. Before getting his share he is charged for his drawings and credited for his capital:
5800 – 40000×10% + 10000 x 8% = 2600
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