Hassan and Irene are partners with capital balances of $50,000 and $30,000 respectively. They share profits and losses in the ratio 2:1. The partnership agreement allows interest on capital at 8% per annum. The net profit for the year was $15,000. What is the residual profit to be shared between the partners?

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Question

Hassan and Irene are partners with capital balances of $50,000 and $30,000 respectively. They share profits and losses in the ratio 2:1. The partnership agreement allows interest on capital at 8% per annum. The net profit for the year was $15,000. What is the residual profit to be shared between the partners?

Accepted Answer

$8,600 — Award 1 mark for correct calculation. Interest on capital: Hassan = $50,000 × 8% = $4,000; Irene = $30,000 × 8% = $2,400. Total interest = $6,400. Residual profit = $15,000 − $6,400 = $8,600. B is incorrect — calculation error. C is incorrect — does not deduct interest on capital. D is incorrect — adds interest to profit instead of deducting.

Answer

$8,600

Answer

$21,400

Answer

$9,600

Answer

$15,000

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