Teteh’s share of profit is?

Teteh and Kukuma are in partnership with capital balances of #300,000 and #200,000 respectively. They agreed to share profit on the basis of their capital. The profit for the year is #150,000 and the interest on capital is 5%.

A. #60,000
B. #90,000
C. #75,000
D. #50,000

Correct Answer:

Option C = #75,000

Explanation

Ratio in their capital = 300,000/200,000 = 3/2 = 3: 2
Total ratio = 3+ 2 = 5

Interest on capital = 5%
Teteh = 5% x 300,000 = 15,000
Kukuma = 5% x 200,000 = 10,000

= 150,000 – ( 15,000 + 10,000)
= 150,000 – 25,000
= 125,000

Teteh’s share of profit = 3/5 x 125,000

= 75,000